As Plan Administrator, the Employer is Liable – Not the Service Provider (i.e., What Kind of Indemnification Are You Getting?)
The plan administrator of an employee benefit plan (employee welfare or retirement) has the general fiduciary responsibility under ERISA to ensure the operational and documentary compliance of the plan. Under ERISA, the sponsoring employer is the plan administrator unless another person or entity is named in the plan. This generally means the employer retains ultimate responsibility and liability for legal compliance even though the employer may rely heavily on the plan’s third-party service providers. One way to mitigate this liability is to obtain indemnification from a service provider for the service provider’s errors, for which the employer (as plan administrator) would still be legally liable. The default language in third-party service provider contracts often provides indemnification only for the service provider’s “gross negligence”, but not its “ordinary negligence”, thus leaving the employer responsible for correcting (and paying for) errors caused by the service provider that do not amount to “gross negligence” or “intentional… Continue Reading
The IRS recently released Notice 2021-49 (the “Notice”), which provides additional guidance for employers who are claiming the employee retention tax credit for the third and fourth quarters of 2021 based on enhancements to the tax credit enacted in the American Rescue Plan Act of 2021 (the “ARPA”). The ARPA extended the employee retention tax credit for “qualified wages” paid to employees between July 1st and December 31st of 2021, and the Notice clarifies that the rules applicable to claiming the enhanced employee retention tax credit under the ARPA are generally the same as those for claiming the credit under the CARES Act. The Notice provides additional guidance on several miscellaneous issues with respect to the credit and also responds to questions received by the IRS related to the credit, including, among others: The definition of full-time employee and whether that definition includes full-time equivalents; The treatment of tips as… Continue Reading
The IRS recently issued Notice 2021-46 (the “Notice”), which provides new guidance in the form of FAQs regarding the application of the COBRA premium assistance provisions of the American Rescue Plan Act of 2021 (the “COBRA Subsidy”). The Notice supplements the IRS’s prior Notice 2021-31 regarding the COBRA Subsidy and addresses additional matters. Issues addressed in the Notice include, among others, (i) the availability of the COBRA Subsidy in situations where an individual is entitled to notify the plan administrator, but has not yet done so, of his or her eligibility for an extended COBRA coverage period due to a disability determination or the occurrence of a second COBRA qualifying event, (ii) the loss of an individual’s entitlement to the COBRA Subsidy with respect to dental and vision coverage when he or she becomes eligible to enroll in other group health plan coverage or Medicare that does not provide dental… Continue Reading
The IRS recently updated its Nonqualified Deferred Compensation Audit Technique Guide (the “Updated Guide”), which replaces the previous version published in June 2015. The Updated Guide provides more detailed guidance on the legal standards applicable to deferred compensation arrangements, including the addition of specific citations to relevant regulations and revenue rulings. Notably, the Updated Guide also includes significantly expanded discussions about Code Section 409A and its application to deferred compensation arrangements. Code Section 409A, and other regulations impacting deferred compensation, are very complicated and can carry substantial penalties and taxes for noncompliance. As Congress and the Biden Administration look for additional sources of funding for their initiatives, heightened IRS audit activity may be on the horizon. The Updated Guide is a good reminder to employers that they should periodically review their nonqualified deferred compensation arrangements, not only for documentary compliance but operational compliance as well. The Updated Guide is available… Continue Reading
The DOL?ÇÖs Employee Benefits Security Administration (the ?Ç£EBSA?Ç¥) recently released additional guidance on PTE 2020-02, Improving Investment Advice for Workers and Retirees, a new prohibited transaction exemption under ERISA that was adopted on December 18, 2020 (the ?Ç£Exemption?Ç¥) (see our prior blog posts about the Exemption here and here). The guidance consists of two documents: (i) a publication titled ?Ç£Choosing the Right Person to Give You Investment Advice: Information for Investors in Retirement Plans and Individual Retirement Accounts?Ç¥ (the ?Ç£Investor Guidance?Ç¥), and (ii) a publication titled ?Ç£New Fiduciary Advice Exemption: PTE 2020-02 Improving Investment Advice for Workers & Retirees Frequently Asked Questions?Ç¥ (the ?Ç£Advisor Guidance?Ç¥). The Investor Guidance provides information on the Exemption for investors and includes a list of questions for investors to ask their investment advice providers, as well as a list of investor-focused FAQs. The Advisor Guidance is compliance focused and includes a list of FAQs targeted… Continue Reading
The IRS recently issued Notice 2021-20, which contains 71 new FAQs related to the employee retention credit (the ?Ç£ERT?Ç¥) 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
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.
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 IRS recently issued updated FAQs related to the expanded paid sick and family leave tax credits authorized under the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥). Specifically, the CAA extends through March 31, 2021, the availability of paid sick and family leave credits, which were first adopted in the Families First Coronavirus Response Act in March 2020. The extended paid leave tax credits are not new benefits and simply extend the period of time during which eligible employers may claim the credits. Consequently, if an employer has already claimed the maximum amount of these tax credits, they will not be eligible to claim additional paid leave tax credits. For additional information on the paid sick and family leave tax credits, please see our prior blog posts here and here. The IRS has yet to update its FAQs for changes made in the CAA to the terms and conditions of… Continue Reading