Employee Benefits Regulations Potentially Impacted by the Biden Administration?ÇÖs Regulatory Freeze
On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) 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 The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review.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 ?Çô 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
The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain ERISA violations. The adjusted penalty amounts apply to penalties assessed after January 15, 2021 and for which the associated violations occurred after November 2, 2015. Some of the penalties that were increased include the following: The maximum penalty for failing to properly file a pension or welfare benefit plan?ÇÖs annual Form 5500 increased from $2,233 per day to $2,259 per day. The maximum penalty for failing to provide notices of blackout periods or of the right to divest employer securities increased from $141 per day to $143 per day (each statutory recipient is a separate violation). The maximum penalty for failing to provide employees the required Children?ÇÖs Health Insurance Program (CHIP) coverage notices increased from $119 per day to $120 per day (each employee… Continue Reading
The safe harbor rules for hardship withdrawals from a retirement plan permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (?Ç£FEMA?Ç¥) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, provided the participant?ÇÖs principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA issued a series of disaster declarations as a result of the February 2021 winter storms that impacted portions of Texas, Louisiana, and Oklahoma. A list of counties that have been designated by FEMA for individual assistance in those states can be found on FEMA?ÇÖs website here. Those disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or work… Continue Reading
The DOL issued guidance today stating that the one-year limit on the suspension of COBRA, special enrollment, and claims deadlines during the COVID-19 outbreak period applies on an individual basis.?á This means those deadlines do not resume running as of March 1, 2021.?á Instead, each individual has up to a one-year suspension as long as the COVID-19 national emergency continues.?á As discussed in our prior blog post here, it was unclear whether those deadlines were to resume running as of March 1, 2021.?á Employers should contact their service providers to ensure they are aware of this new guidance and to issue new participant communications as needed. Notice 2021-01 is available here.
After February 28, 2021, the suspension of COBRA, special enrollment, and claims deadlines may be over. The government?ÇÖs authority for suspending these deadlines is limited by statute to a period of one year. It is unclear whether the one-year limit applies on the individual level (i.e., each person gets up to a year disregarded if the national emergency is ongoing) or applies as a limit on the outbreak period itself (i.e., deadlines for all persons would resume being counted as of March 1, 2021). The DOL/IRS have not yet issued guidance on this question. Employers may want to contact their service providers to see how they intend to administer, and communicate to participants, the end of the suspension of deadlines.
In 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the ?Ç£Act?Ç¥) was enacted. The Act is part of the Consolidated Appropriations Act of 2021. The Act provides employer sponsors of cafeteria plans, including health flexible spending accounts (?Ç£HFSAs?Ç¥) and dependent care flexible spending accounts (?Ç£DCFSAs?Ç¥) (collectively, ?Ç£FSAs?Ç¥), with helpful new options for easing the normal FSA use-it-or-lose-it and mid-year election change rules. Generally, the Act provides for (i) flexibility with respect to carryovers of unused FSA amounts from the 2020 and 2021 plan years (?Ç£Enhanced Carryover?Ç¥); (ii) extension of the permissible period for incurring FSA claims for plan years ending in 2020 and 2021 (?Ç£Enhanced Grace Period?Ç¥); (iii) a special rule regarding post-termination reimbursements from HFSAs during plan years 2020 and 2021 (?Ç£HFSA Post-Termination Option?Ç¥); (iv) a special claims period and carryover rule for DCFSAs when a dependent ?Ç£ages out?Ç¥ during the COVID-19 public health emergency; and… Continue Reading
We will begin providing periodic updates on upcoming benefit compliance and/or plan amendment deadlines so that you can add them to your to-do list. Each deadline will have links to our prior blog posts that provide more detailed information about that subject.?á As of February 10, 2021, an employer-sponsored group health plan that imposes nonquantitative treatment limitations (?Ç£NQTLs?Ç¥) on mental health or substance use disorder benefits must make available to federal agencies, upon request, a comparative analysis of the design and application of NQTLs, including the specific findings and conclusions reached by the plan and any results of the comparative analysis that indicate the plan is or is not in compliance. For more information, please read our blog post here.
The SECURE Act and CARES Act made significant changes to required minimum distributions (?Ç£RMDs?Ç¥). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70??.?á Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70?? to age 72, but only for individuals who turned age 70?? on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70??, while those… Continue Reading
As we?ÇÖve previously reported here, there are a number of record retention requirements applicable to employee benefit plans. Plan sponsors should be mindful of the impact and application of these requirements in the context of corporate mergers and acquisitions, especially if assets of the target?ÇÖs retirement plan are to be merged into the buyer?ÇÖs plan. When acquiring a company that sponsors (or has sponsored) its own retirement plan, plan sponsors should consider: Protected Benefits. Though the buyer?ÇÖs plan may be amended to protect certain benefits under the target?ÇÖs plan, as required by the Internal Revenue Code, in many cases the plan sponsor will need to refer to the target?ÇÖs actual plan document to fully understand the specifics of the protected benefits. Missing Participants. The DOL recently issued a memorandum outlining best practices for pension plans to avoid and resolve missing participant issues (we previously discussed this issue here). Included in… Continue Reading
Puerto Rico to Allow Rollovers from the Government Plan for Puerto Rico Employees to Qualified Retirement Plans
On January 20, 2021, the Puerto Rico Department of Treasury released Administrative Determination No. 21-01 (?Ç£AD 21-01?Ç¥), allowing for direct and indirect rollovers of lump-sum distributions from the defined contribution government plan for Puerto Rico employees to a plan that is qualified under Section 1081.01(a) of the Puerto Rico Internal Revenue Code of 2011, as amended (the ?Ç£Code?Ç¥), maintained by a private-sector employer. Such rollovers would be considered exempt transactions and would not be subject to income tax withholding under Section 1081.01(b) of the Code. The provisions of AD 21-01 are effective immediately. AD 21-01 is available here.