In Revenue Procedure 2021-30 (“Rev. Proc. 2021-30”), the IRS made certain updates to the Employee Plans Compliance Resolution System (“EPCRS”), including updates to the Self-Correction Program (“SCP”) and the Voluntary Correction Program under EPCRS. Among other updates, Rev. Proc. 2021-30 expands the correction methods for benefit overpayments by adding (i) the “funding exception correction method,” which provides an exception to corrective payments for plans that meet certain funding requirements, and (ii) the “contribution credit correction method,” which prescribes the amount of overpayments required to be repaid to the plan under certain circumstances. Further, Rev. Proc. 2021-30 (i) expands the circumstances under which plan sponsors may correct operational failures under the SCP by plan amendment, and (ii) extends, by one year, the end of the SCP correction period for significant failures. Rev. Proc. 2021-30 is available here.
Section 9705 of the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) extends the amortization period for prior year shortfalls from seven to 15 years, beginning with the 2022 plan year (or, at the election of the plan sponsor, the 2019, 2020, or 2021 plan year). Section 9706 of the ARPA both modifies and extends the funding stabilization percentages for single employer defined benefit pension plans through 2029 and allows plan sponsors to elect whether to have these modified percentages apply for all purposes or solely for the purpose of determining the plan?ÇÖs adjusted funding target attainment percentage.?á The plan sponsor may further elect whether to apply the modified percentages beginning with the 2020, 2021, or 2022 plan year.?á The ARPA is available here.?á
The IRS recently issued Notice 2020-61 (the ?Ç£Notice?Ç¥) containing 18 questions and answers that provide helpful guidance for sponsors of single-employer defined benefit pension plans regarding Section 3608 of the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). Section 3608 of the CARES Act delays the due date for ?Ç£minimum required contributions?Ç¥ otherwise due during calendar year 2020 until January 1, 2021. In addition, it allows plan sponsors to use the plan?ÇÖs adjusted funding target attainment percentage (?Ç£AFTAP?Ç¥) for the last plan year ending before January 1, 2020, for plan years that include calendar year 2020. The Notice addresses issues related to the deadline extension for minimum required contributions under the CARES Act, including how the contributions are to be adjusted for interest. The Notice also discusses issues related to the use of the prior year AFTAP for benefit limitations. Plan sponsors should consult with their benefits counsel… Continue Reading
The Supreme Court Holds Participants in Fully-Funded Defined Benefit Plans Cannot Sue for Fiduciary Breach
The U.S. Supreme Court held Monday that participants in a fully-funded defined benefit plan have no standing to bring a lawsuit against plan fiduciaries for a breach of ERISA?ÇÖs fiduciary requirements. In Thole, plan participants alleged that the plan fiduciaries had mismanaged funds and invested in imprudent investments causing the plan to lose approximately $748 million more than it otherwise should have during the 2008 recession. Subsequent to that date, the plan sponsor contributed an additional $311 million to the plan resulting in the plan becoming fully funded. The Court held that because the participants would receive the same benefits whether they won or lost the lawsuit, there was no controversy and, therefore, the participants had no standing under Article III of the U.S. Constitution to bring a civil action under Sections 502(a)(2) or 502(a)(3) of ERISA. Thole v. U.S. Bank N.A., No. 17?Çô1712 (U.S. June 1, 2020) can be… Continue Reading
The DOL’s Employee Benefits Security Administration (?Ç£EBSA?Ç¥) recently issued EBSA Disaster Relief Notice 2020-01. Notice 2020-01 applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA. Notice 2020-01 remains in effect from March 1, 2020 until 60 days after the announcement of the end of the presidentially declared national emergency due to COVID-19 (the ?Ç£National Emergency?Ç¥). Untimely Notice Relief Fiduciaries of ERISA plans generally have an obligation to provide notices and disclosures in accordance with the timing requirements of ERISA. However, under Notice 2020-01, the employee benefit plan and the responsible plan fiduciary will not be considered to violate ERISA for failing to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020 and 60 days after the announced end of the National Emergency, if the plan and responsible fiduciary act in… Continue Reading