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Fifth Circuit Decision is a Reminder to Employers on Structuring Severance Plans

Last week’s decision by the U.S. Court of Appeals for the Fifth Circuit in Atkins v. CB&I, LLC is a reminder that employers may prefer to structure bonus and severance programs so as to be covered by ERISA and thus avoid being subject to unfavorable state laws. In Atkins, five employees brought suit in Louisiana state court claiming their employer’s project incentive bonus plan—which pays a single bonus payment to employees who are laid off or complete their roles in a specific project—constituted an illegal wage forfeiture agreement under the Louisiana Wage Payment Act. Each of the employees had quit and consequently forfeited their bonuses under the plan’s terms. The employer removed the suit to federal district court claiming the bonus plan was a severance plan subject to ERISA and thus ERISA, as controlling federal law, preempted the employees’ state law claims. The district court agreed. The Fifth Circuit reversed… Continue Reading

Upcoming Compliance Deadline

Beginning April 1, 2021, the American Rescue Plan Act of 2021 will provide a 100% COBRA premium subsidy (the “Subsidy”) to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or a reduction in hours of employment. For more information on the Subsidy, please see our prior blog post here.

American Rescue Plan Enhancements to Employee Retention Credit

The American Rescue Plan Act of 2021 (“ARPA”) extended the employee retention credit through the end of 2021 and enhanced the scope of employers eligible to claim the credit by adding two new employer categories: (i) “recovery startup businesses” and (ii) “severely financially distressed employers”.  A “recovery startup business” is a business that was created after February 15, 2020 and has annual gross receipts of no more than $1,000,000. Recovery startup businesses may claim the employee retention credit (capped at $50,000 per quarter) even if they do not otherwise qualify for the credit (i.e., they neither experienced a complete or partial shutdown due to a COVID-19 governmental shutdown order nor had a decrease in gross receipts of at least 20% for the applicable quarter). A “severely financially distressed employer” is an employer who had a decrease in gross receipts of at least 90% for the applicable quarter, and such employers… Continue Reading

New Required COBRA Premium Subsidy

Beginning on April 1, 2021, the American Rescue Plan Act of 2021 (“ARPA“) will provide a 100% COBRA premium subsidy (the “Subsidy”) to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or reduction in hours of employment. Under the ARPA, the federal government will reimburse the employer, in the form of a tax credit, the cost of the premiums for up to six months, from April 1 to September 30, 2021. Specifically, the Subsidy will end on the earliest of: (i) September 30, 2021; (ii) the date the qualified beneficiary becomes eligible for other health plan coverage or Medicare; or (iii) the date the qualified beneficiary’s COBRA coverage period ends. Further, any individual who would have been eligible for the Subsidy, had he or she previously elected, or continued, COBRA coverage, will have another opportunity to elect COBRA coverage under a special… Continue Reading

ARPA Relaxes Funding Requirements for Single Employer Defined Benefit Pension Plans

Section 9705 of the American Rescue Plan Act of 2021 (“ARPA”) extends the amortization period for prior year shortfalls from seven to 15 years, beginning with the 2022 plan year (or, at the election of the plan sponsor, the 2019, 2020, or 2021 plan year). Section 9706 of the ARPA both modifies and extends the funding stabilization percentages for single employer defined benefit pension plans through 2029 and allows plan sponsors to elect whether to have these modified percentages apply for all purposes or solely for the purpose of determining the plan’s adjusted funding target attainment percentage.  The plan sponsor may further elect whether to apply the modified percentages beginning with the 2020, 2021, or 2022 plan year.  The ARPA is available here. 

The DOL Announces a Non-Enforcement Policy on Final ESG Investment and Proxy Voting Rules

On March 10, 2021, the DOL released an enforcement policy statement (the “Statement”), which announced that until the DOL publishes further guidance, it will not enforce the recently issued “Financial Factors in Selecting Plan Investments” final rule (the “ESG Rule”) and the “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” final rule (the “Proxy Voting Rule”, together with the ESG Rule referred to herein as, the “Final Rules”). The ESG Rule generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors,” and the Proxy Voting Rule set forth a plan fiduciary’s obligations when voting proxies and exercising other shareholder rights in connection with plan investments. The implementation of the ESG Rule in particular has caused concerns for plan fiduciaries about the use of environment, social, and governance considerations in its investment decisions and has been met with increasing criticism from a… Continue Reading

Big Increase in Dependent Care Flexible Spending Account Limit for 2021

The American Rescue Plan Act of 2021 (“ARPA”), which was enacted on March 11, 2021, temporarily increases the maximum amount that an employee is permitted to contribute to a dependent care flexible spending account (“FSA”) from $5,000 to $10,500 (or from $2,500 to $5,250 for a married person filing a separate return) for the taxable year beginning in 2021. The increased dependent care FSA limit is an optional change that a plan sponsor may choose to incorporate into its dependent care program included under its cafeteria plan. This change, combined with the change under the Consolidated Appropriations Act, 2021 (“CAA”), which authorizes a cafeteria plan to permit participants to make prospective changes to their dependent care FSA contributions (see our prior blog post regarding the CAA here), allows participants to increase contributions to their dependent care FSAs in 2021. In order to implement the new dependent care FSA limit, the… Continue Reading

Court Finds Exclusion for Autism Treatments Violates the Mental Health Parity and Addiction Equity Act

In Doe v. United Behavioral Health, No. 4:19-CV-07316-YGR (N.D. Cal. Mar. 5, 2021) a federal district court in California recently considered a plaintiff’s claim that an exclusion from coverage for “applied behavior analysis” and “intensive behavioral therapies” (the “ABA/IBT Exclusion”) used to assist children with Autism Spectrum Disorder (“Autism”) violated the federal Mental Health Parity and Addiction Equity Act (the “Parity Act”). The plaintiff, as the representative of her minor son who was diagnosed with Autism, was covered under an employer-sponsored, self-funded group health plan subject to ERISA.  The court held that the ABA/IBT Exclusion violated the Parity Act for two reasons. First, the court found that the ABA/IBT Exclusion, on its face, created a separate treatment limitation applicable only to services for a mental health condition (in this case, Autism). Second, the court concluded that the ABA/IBT Exclusion constituted a more restrictive limitation for a mental health condition than… Continue Reading

IRS Issues New FAQs on Claiming the Employee Retention Credit

The IRS recently issued Notice 2021-20, which contains 71 new FAQs related to the employee retention credit (the “ERT”) available on qualified wages paid between March 13, 2020 and December 31, 2020. The new FAQs do not address changes to the ERT enacted as part of the Consolidated Appropriations Act, 2021 on qualified wages paid between January 1, 2021 and June 30, 2021, which the IRS says will be addressed in future guidance. The FAQs provide numerous, helpful examples of how to apply key definitions and other provisions applicable to the ERT, such as who is an eligible employer; what constitutes a full or partial suspension of a trade or business, a significant decline in gross receipts, qualified wages, and allocable qualified health plan expenses; and the interaction of the ERT and Paycheck Protection Program loan recipients, among other topics. For additional information on the ERT, please see our prior… Continue Reading

Employee Benefits Regulations Potentially Impacted by the Biden Administration’s Regulatory Freeze

On January 20, 2021, the Biden Administration issued a memorandum (the “Memo”) announcing a regulatory freeze on regulations that have not taken effect as of the date of the Memo. Specifically, the Memo recommends postponing the effective date of any regulation that has been issued, but has not taken effect, for 60 days from the date of the Memo. The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review. Listed below are some of the proposed and final regulations related to employee benefits that may be subject to withdrawal or postponement under the Memo: Prohibited Transaction Exemption 2020-02 – Improving Investment Advice for Workers & Retirees. Final Rule. Application of the Employer Shared Responsibility Provisions and Certain Nondiscrimination Rules to Health Reimbursement Arrangements and Other Account-Based Group Health Plans Integrated with Individual Health Insurance Coverage or Medicare. Final Rule. Pension Benefit Statements-Lifetime… Continue Reading

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