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IRS Releases FAQs on Rehiring Retirees and Retaining Employees After Retirement Age

As employers around the country struggle with labor shortages, many are turning to former employees who retired to fill in the gaps. The IRS recently released two FAQs on plan distributions related to concerns with the rehiring of retirees and the retention of employees who have reached their retirement age. Generally, for plans that do not permit in-service distributions, benefit distributions to an individual may only commence when the individual has a bona fide retirement. The FAQs state that rehiring an individual who already experienced a bona fide retirement will not cause such retirement to no longer be considered “bona fide” if the rehiring was due to unforeseen circumstances that do not reflect any prearrangement to rehire. Thus, if a plan’s terms permit, benefit distributions can continue after the rehire. The FAQs also state that plans may generally permit in-service distributions for employees who have reached age 59½ or the… Continue Reading

Reminder About Key 2021 Year-End Amendments

As the end of the calendar year approaches, plan sponsors are reminded to adopt certain amendments that may be required for their benefit plans to conform to regulations or reflect certain legal and/or plan design changes. Retirement Plans 2019 Required Amendments List In Notice 2019-64, the IRS published the 2019 Required Amendments List (the “List”), which lists the amendments required to be adopted by December 31, 2021. Pursuant to the List, plans offering hardship distributions must be amended in accordance with the final regulations issued under the Bipartisan Budget Act of 2018. In addition, the List provides that collectively bargained cash balance/hybrid defined benefit plans maintained pursuant to collective bargaining agreements ratified on or before November 13, 2015 must be amended to comply with the final cash balance/hybrid plan regulations. The List also includes certain periodic changes that took effect in 2019, such as adjustments to various dollar limits for… Continue Reading

DOL Issues Proposed Rule (Again) to Address Selecting Plan Investments and Exercising Shareholder Rights

On October 13, 2021, the DOL released a proposed rule which effectively provides that ERISA plan fiduciaries may consider climate change and other environmental, social, and governance (“ESG”) factors when they make investment decisions and when they exercise shareholder rights. Under the Trump administration, in late 2020, the DOL previously issued a final rule on “Financial Factors in Selecting Plan Investments” (generally requiring plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors”) and a related final rule on “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” (addressing obligations of plan fiduciaries under ERISA when voting proxies and exercising other shareholder rights in connection with plan investments in shares of stock) (collectively, the “Prior Rules”). Subsequently, President Biden issued executive orders which directed the DOL to consider a proposed rule to suspend, revise, or rescind the Prior Rules, and in March 2021, the… Continue Reading

New Provisions for Group Health Plan Administrative Services Agreements

As discussed in our prior blog post here, employer-sponsored, group health plans that impose nonquantitative treatment limitations (“NQTLs”) on mental health or substance use disorder benefits (“MH/SUD Benefits”) must make available to certain federal agencies, upon request, a “comparative analysis” report of the design and application of NQTLs under the plan. Plan sponsors should review their services agreements with third party administrators (“TPAs”) to determine whether the TPA will perform the analysis on behalf of the group health plan and provide the plan sponsor with a legally-compliant report covering the application of NQTLs for MH/SUD Benefits. While many TPAs currently provide some information to assist a plan sponsor with preparing the NQTL comparative analysis report, it is ultimately the plan sponsor’s responsibility to provide such report to the federal agencies if requested, and not the TPA’s obligation even though the TPA controls the data needed to prepare the report. Plan… Continue Reading

Federal Circuit Tells Patent Office to Limit Scope of Design Patents, Overturning Patent Office Precedent

Federal Circuit Tells Patent Office to Limit Scope of Design Patents, Overturning Patent Office Precedent

On October 4, 2021, the Court of Appeals for the Federal Circuit told the Patent Office that the way it has been reviewing design patent applications is wrong, and that a design patent claim must be limited to the article of manufacture identified in the claim. In re: SurgiSil, L.L.P., et al, No. 2020-1940, 2021 WL 4515275 (Fed. Cir. Oct. 4, 2021). SurgiSil filed a design patent application claiming an “ornamental design for a lip implant as shown and described.” The Patent Office rejected the claim as anticipated, or not novel, in light of an art tool called a stump. Images of the claimed lip implant design (first image) and the art tool stump (second image) are shown below. In making the rejection, the Patent Office cited its own Manual of Patent Examining Procedure, MPEP § 1504.02, and a 1956 Court of Customs and Patent Appeals case, In re: Glavas, 230 F.2d… Continue Reading

Agencies Issue FAQs Clarifying Wellness Program and Other Health Plan Requirements Related to COVID-19 Vaccines

The DOL, Treasury Department, and HHS have jointly issued a set of FAQs that provide helpful clarifications regarding certain requirements under the CARES Act, the HIPAA nondiscrimination rules (the “Nondiscrimination Rules”), and the Affordable Care Act (the “ACA”) related to COVID-19 vaccines (“Vaccines”).  Wellness Programs under the Nondiscrimination Rules Among other items, the FAQs provide guidance under the Nondiscrimination Rules regarding an employer’s imposition of a premium discount under a wellness program for an individual’s receipt of a Vaccine. If the wellness program is itself, or is part of, a group health plan that is not otherwise exempt from the Nondiscrimination Rules, the FAQs confirm that a premium discount would constitute a “health-contingent, activity-only” wellness program that must, among other requirements, offer a “reasonable alternative standard” to qualify for the discount for individuals for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to receive the… Continue Reading

IRS Provides Further Clarification Regarding COBRA Deadline Extensions

Last year, the DOL and IRS issued joint guidance providing that certain plan related deadlines, including the 60-day deadline to elect COBRA continuation coverage and the 45-day deadline to make COBRA premium payments, would be suspended during the “COVID-19 outbreak period” (i.e., the time period from March 1, 2020 until 60 days after the end of the national emergency or other date announced by the government) for up to one year. The DOL released other guidance earlier this year clarifying that the one-year deadline suspension is applied on an individual basis (see our prior blog post on that guidance here). Recently, the IRS issued Notice 2021-58 (the “Notice”), which clarifies that the extended timeframes for an individual to (i) elect COBRA continuation coverage, and (ii) make initial and subsequent COBRA premium payments, generally run concurrently. The Notice provides that if an individual elects COBRA coverage after the 60-day election period… Continue Reading

Are Your Voluntary Benefits Programs Subject to ERISA?

An issue that many employers face is whether their so-called “voluntary benefits programs” should be considered ERISA plans. Voluntary benefits programs are characterized by employee-only paid premiums and limited employer involvement in a fully insured product. For the benefits provided under such a voluntary benefits insurance policy to be exempt from ERISA, the employer’s involvement in administering the policy must satisfy the requirements set out in the ERISA safe harbor regulation, as interpreted by the DOL and various courts. Generally, such a program will be exempt from ERISA if (i) there are no employer contributions toward coverage, (ii) participation in the program is completely voluntary, (iii) the employer does not endorse the program, and (iv) the employer receives no consideration for the program.  A recent case decided by a federal district court in Kentucky applied the above principles to determine whether a voluntary accidental death insurance policy was subject to… Continue Reading

Recent IRS Snapshot Regarding Deemed Distributions for Participant Loans Reminds Employers of Risk of Plan Loan Errors

The IRS recently released an Issue Snapshot (the “Snapshot”) focusing on participant loans from retirement plans and when certain compliance errors could trigger deemed distributions with respect to such loans. Specifically, the Snapshot lists the following requirements, which if not satisfied, will cause a participant loan to be treated as a deemed distribution: Enforceable agreement requirement, which generally requires a participant loan to be a legally enforceable agreement (which may include more than one document) and the terms of the agreement demonstrate compliance with the applicable requirements of the Code. Maximum loan amount limit requirement, which generally limits the maximum amount of a participant loan to the amount specified under the Code. The Snapshot also noted the CARES Act allowed modifications to the loan limit for certain loans to “qualified individuals.” Repayment period requirement, which generally requires the repayment period of a loan be limited to five years, unless the loan… Continue Reading

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