With the start of the new year, a good New Year’s resolution for employers that sponsor ERISA retirement and/or health and welfare benefit plans is to ensure that all current ERISA plan fiduciaries—including any new members of plan administrative and investment committees—have received up-to-date ERISA fiduciary training. ERISA litigation brought against individual plan fiduciaries has significantly increased in recent years. Plan fiduciaries assume responsibilities and make decisions that could potentially subject them to substantial personal liability. To mitigate this risk exposure, each committee member (or other ERISA plan fiduciary) should receive fiduciary training initially upon becoming a plan fiduciary and at least annually thereafter. Plan fiduciaries need to understand (i) when they are acting on behalf of the plan’s participants in a fiduciary capacity, (ii) the different fiduciary roles under a plan and how fiduciary liability can attach in different ways, (iii) the difference between fiduciary decisions and non-fiduciary (“settlor”)… Continue Reading
We previously provided an overview of the Consolidated Appropriations Act of 2021 (the “CAA”) and the specific benefits changes employers need to focus on right now, which can be found here. There were numerous other provisions of the CAA that will impact retirement and group health plans. As the effective dates for those other provisions approach, we will provide you with a summary of the new provisions and how they may impact your plans.
The Consolidated Appropriations Act of 2021 and Benefits Changes Employers Need to Focus on Right Now
Retirement Plans Additional Relief May Help Prevent Partial Plan Terminations The recently adopted Consolidated Appropriations Act of 2021 (the “CAA”) provides relief for qualified retirement plans of employers that had to reduce their workforce as a result of the pandemic (through furloughs, layoffs, or terminations) for plan years that include the period beginning on March 13, 2020 and ending on March 31, 2021. Specifically, these plans shall not be treated as incurring a partial plan termination if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants that were covered by the plan on March 13, 2020. A partial plan termination generally occurs when more than 20% of a plan’s participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any “affected employees”. “Affected employees” are… Continue Reading
The Employee Benefits/Executive Compensation practice at Haynes and Boone, LLP thanks you for reading our newsletter and blog this year. As many have said before, 2020 was a challenging year, and we are honored to have been able to help you navigate those challenges and prepare for the opportunities that 2021 will provide. This past year has made us focus even more on what matters most, our clients, and providing them with the best and most practical advice possible. As a testament to our keen focus on client service, our Employee Benefits/Executive Compensation practice earned the following accolades in 2020: The Chambers USA 2020 guide, Chambers and Partners, named the firm a Recognized Practitioner in Employee Benefits and Executive Compensation nationwide and ranked the firm in Band 1 for both Dallas, Fort Worth and Surrounds and Houston and Surrounds. The “Best Law Firms” 2021 edition, U.S. News and World Report… Continue Reading
The DOL recently finalized Prohibited Transaction Exemption 2020-02 – Improving Investment Advice for Workers & Retirees (“PTE 2020-02”) for investment advice fiduciaries. PTE 2020-02 finalizes the proposed exemption which we previously reported on here. This guidance for investment advice fiduciaries completes the regulatory process that began in 2016 with the new fiduciary regulations and exemptions issued under the Obama administration, which were vacated in 2018, and the reinstatement of prior regulations and the issuance of new exemption guidance earlier this year. While PTE 2020-02 makes some changes to the proposed exemption, it largely retains the proposed exemption’s protective framework, including the “Impartial Conduct Standards” (under which investment advice fiduciaries must provide advice that is in the retirement investor’s “best interest”), required disclosures, implementation of policies and procedures to comply with the standards and mitigate conflicts of interest, and retrospective compliance review. The final exemption also includes a self-correction mechanism for… Continue Reading
Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction. Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500. The DOL can assess a penalty… Continue Reading
As a reminder, the last day that coronavirus-related distributions may be made from an eligible retirement plan to a qualified individual is December 30, 2020, and not December 31, 2020. Distributions may be included in income ratably over the 2020, 2021, and 2022 tax years or, if the participant elects, may be included entirely in income in 2020. For more information on coronavirus-related distributions, please see the IRS FAQs here.
Last week, HHS issued a Notice of Proposed Rulemaking that proposes changes to the HIPAA Privacy Rule that will affect HIPAA privacy policies and procedures for employer group health plans. The proposed revisions affect (i) an individual’s right to access “protected health information” (“PHI”), (ii) the content required in the Notice of Privacy Practices, and (iii) the ability to use and disclose PHI based on professional judgment, to avert a threat to health or safety, or for coordination of care and case management. HHS proposed that compliance with the changes would be required within 180 days after the effective date of a final rule. HHS has requested comments on the proposed changes within 60 days after their publication in the Federal Register, which publication should occur soon. The Notice of Proposed Rulemaking is available here.
The IRS recently issued final regulations relating to amendments made to Code Section 402(c) by the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The TCJA provides an extended rollover period for plan loan offset amounts that are treated as distributed from a qualified plan due to (i) termination of the plan or (ii) failure to repay the loan due to the participant’s severance from employment, each a “qualified plan loan offset” (“QPLO”). Although most of the general rules relating to plan loan offsets apply to QPLO amounts, the permissible rollover period is extended. Generally, a participant has only 60 days to contribute the loan offset amount in a tax-free rollover to another qualified retirement plan. However, a participant may roll over QPLO amounts into another qualified retirement plan until the due date for his or her personal income tax return for the year in which the QPLO occurred.… Continue Reading
The IRS recently issued Notice 2020-86 (the “Notice”), which provides guidance through a series of questions and answers with respect to Sections 102 and 103 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). Section 102 of the SECURE Act increases the maximum automatic elective deferral percentage for automatic enrollment safe harbor plans from 10% to 15% (provided, however, that the maximum automatic deferral rate remains 10% during the initial period of automatic elective contributions). Notably, the Notice clarifies that a QACA safe harbor 401(k) plan is not required to increase the maximum percentage, so long as the percentage is (i) applied uniformly, (ii) does not exceed 15% (or 10% during the initial period of automatic elective contributions), and (iii) satisfies certain other minimum percentage requirements as described in Code Section 401(k)(13)(C)(iii). The Notice also clarifies that, if a plan incorporates the maximum qualified… Continue Reading