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Is it Time to Give Your Pension Plan a Lift-Out?

While pension plans can provide much needed retirement benefits to an employer’s workforce, the associated liabilities of defined benefit and cash balance plans also can have a number of negative impacts on the employer, including on its financial statements. One method to reduce these negative impacts is to remove some of the liabilities from the plan by using a pension “lift-out.” Essentially, a “lift-out” transfers risk and certain liabilities (usually for retirees or beneficiaries in pay status) to an annuity provider outside of the plan. For the past few years, the value of doing a lift-out has been reduced because of the high cost of the annuities. However, the recent increase in interest rates has made annuities much more affordable, which makes a lift-out a more attractive option in the current market. Plan sponsors considering a lift-out should design a plan to implement the lift-out, which should include, without limitation,… Continue Reading

New FAQs Address Issues Related to Contraceptive Coverage under Group Health Plans

The federal Treasury, DOL, and HHS (collectively, the “Agencies”) jointly issued a new set of FAQs to address various issues regarding the requirement for most employer-provided and other applicable group health plans to cover contraceptives without cost-sharing under the preventive care mandate of the Affordable Care Act (the “Contraceptive Coverage Mandate”). In particular, the FAQs are intended to (i) respond to reports that individuals continue to experience difficulty accessing contraceptive coverage without cost sharing; (ii) clarify application of the Contraceptive Coverage Mandate to fertility awareness-based methods and emergency contraceptives; and (iii) address the preemption of state law by the Contraceptive Coverage Mandate.  Specific issues addressed in the FAQs include the following:  The requirement for plans to cover items and services that are integral to the furnishing of a recommended preventive service, such as anesthesia necessary for a tubal ligation procedure; The requirement for a plan to cover, without cost-sharing, FDA-approved… Continue Reading

Department of Labor Releases Spring 2022 Regulatory Agenda

The DOL recently released its Spring Regulatory Agenda, and it contains several important retirement and welfare plan initiatives for this year. Below is a summary of some of the material items that plan sponsors should be aware of, along with the DOL’s proposed schedule of rulemaking:  Final Pension Benefit Statement Lifetime Illustrations Rule (Final Rule scheduled for August 2022). Note: Under the DOL’s previously issued Interim Final Rule, the inclusion of lifetime illustrations once per year on pension benefit statements became effective in June 2022. Revised procedures for granting prohibited transaction exemptions (the DOL is currently reviewing comments from its Proposed Rule from March 2022). Amendment and restatement of the DOL’s Voluntary Fiduciary Correction Program to expand the scope of eligible transactions and to streamline correction procedures (Interim Final Rule scheduled for July 2022). Amendment of the regulatory definition of the term “fiduciary” under ERISA for those persons who render investment… Continue Reading

DOL Fiduciary Rule and Prohibited Transaction Exemption Compliance Date is Approaching

Beginning July 1, 2022, retirement investment providers that provide fiduciary rollover advice must document and disclose to the customer the specific reasons that the rollover to a plan or an individual retirement account (“IRA”) is in the “best interest” of the customer. Investment providers that make such rollover recommendations must comply with Prohibited Transaction Exemption 2020-02 (the “Exemption”) in order to retain investment related fees generated from that advice without running afoul of ERISA’s prohibited transaction rules. In general, advice is in a customer’s “best interest” if it is both prudent and loyal, and does not place the financial or other interests of the investment provider or financial institution ahead of the interests of the customer. As part of the rollover documentation and disclosure to customers, the following factors should be considered: (i) the customer’s alternatives to a rollover, including leaving the money in the plan, if permitted, and selecting… Continue Reading

Service Providers May Allow Investment in Cryptocurrency, but Plan Administrators Should Proceed with Extreme Caution

Recently, one of the country’s largest retirement plan providers announced they were adding a digital assets account to their retirement plan platform that would allow employers to make cryptocurrency, such as Bitcoin, a potential investment option for plan participants.  As we previously reported here, prior to that announcement, the DOL had issued guidance cautioning plan fiduciaries to “exercise extreme care” before adding a cryptocurrency option to a retirement plan’s investment lineup or even through a plan’s brokerage window. The DOL guidance went so far as to say that it expected to investigate plans that offer “participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments.” The DOL cautioned that plan fiduciaries who allowed cryptocurrency as a plan investment option “should expect to be questioned” about how their decisions to allow investments in cryptocurrency align with their… Continue Reading

Deadline to Provide Initial Lifetime Income Illustrations is Approaching

As discussed in our prior blog post here, the SECURE Act requires plan administrators to provide annual statements illustrating participants’ accrued benefits in two lifetime income stream illustrations: (i) a single life annuity, and (ii) a qualified joint and survivor annuity. The statements must include a clear and understandable explanation of the assumptions underlying the illustrations.    Participant-directed individual account plans that furnish quarterly benefit statements to participants must include a participant’s lifetime income illustrations on at least one statement in any 12-month period. The initial lifetime income illustrations must be included on the quarterly statement for the second calendar quarter of 2022 if the illustrations were not included on an earlier statement.  A DOL fact sheet on Lifetime Income Illustrations is available here. A list of FAQs implementing the DOL interim final rule is available here.  

DOL Issues Guidance Cautioning 401(k) Fiduciaries Against Offering Crypto as an Investment Option

The DOL issued guidance reminding responsible 401(k) plan fiduciaries of their ongoing duty to monitor investments and cautioning that the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.” The DOL listed five reasons why cryptocurrency investments and their derivatives (collectively, “Crypto”) may not be a prudent selection at this time and threatened that 401(k) plan fiduciaries who allow Crypto as an investment option (even if through a brokerage window) “should expect to be questioned about how they can square their actions with their duties of prudence and loyalty.” Accordingly, 401(k) plan fiduciaries who are contemplating including or retaining Crypto as a plan investment option should factor this DOL guidance into their decision-making process.   Compliance Assistance Release No. 2022-01 is available here.

DOL Responds to Texas Court Invalidating Portions of the No Surprises Act Regulations

The United States District Court for the Eastern District of Texas recently invalidated portions of an interim final rule (the “Rule”) issued by the Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) relating to aspects of the federal independent dispute resolution process under the No Surprises Act (the “Act”). Generally, the court vacated the portion of the Rule that creates a rebuttable presumption that the amount closest to the qualifying payment amount (generally, the average contracted rate) is the proper payment amount. The court found those portions of the Rule conflicted with the Act. In response, the DOL issued a memorandum emphasizing that all other rulemaking by the Departments under the Act has not been affected and thus all such other rulemaking is still in force. Only guidance documents that are based on, or refer to, the portions of the Rule that were invalidated were withdrawn… Continue Reading

FAQs Provide Additional Guidance Regarding At-Home COVID-19 Testing Coverage Requirements

As discussed in our prior blog post here, employer-provided group health plans, and insurers and other issuers, are required to cover the cost of over-the-counter, at-home COVID-19 tests (“OTC Tests”) authorized by the Food and Drug Administration (“FDA”). The DOL, HHS, and the Treasury Department (collectively, the “Departments”) previously issued guidance establishing a safe harbor that, if satisfied, allows plans and issuers to limit the reimbursement of OTC Tests to $12 per test (or the actual cost of the OTC Test, if lower). The Departments recently issued additional guidance in the form of FAQs clarifying how plans and issuers may comply with the safe harbor OTC Test coverage requirements. The FAQs clarify that whether a plan or issuer satisfies the safe harbor by providing adequate access to OTC Tests through its direct coverage program will depend on the particular facts and circumstances, but will generally require that OTC Tests are… Continue Reading

DOL Increases Civil Monetary Penalties for Certain ERISA Violations

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, 2022 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’s annual Form 5500 increased from $2,259 per day to $2,400 per day. The maximum penalty for failing to provide notices of blackout periods or of the right to divest employer securities increased from $143 per day to $152 per day (each statutory recipient is a separate violation). The maximum penalty for failing to provide employees the required Children’s Health Insurance Program, or CHIP, coverage notices increased from $120 per day to $127 per day (each… Continue Reading

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