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Reminder: Employer Obligations Regarding Employee Life Insurance Coverage

In our prior blog post here, we discussed the case of Anastos v. IKEA Property, Inc., which highlighted the importance of an employer?ÇÖs understanding of how its group term life insurance coverage is impacted by changes in employment status, such as termination of employment, retirement, or a leave of absence. This understanding is necessary for the employer to correctly communicate to employees when life insurance coverage will end, when evidence of insurability will be required, and the requirements necessary to convert coverage. In Anastos, the employer drafted its retiree benefit plan to state that eligible retirees could continue life insurance and that, in most cases, coverage would be guaranteed with no medical certification required. When a retiree attempted to obtain this coverage, the employer admitted that its plan was misleading and that it could not obtain underwriting to provide that kind of life insurance continuation benefit. The retiree sued, and… Continue Reading

Reminder: A Release of Claims May Not Offer Blanket Protection Against Potential ERISA Claims

A recent federal district court case,?áAnastos v. IKEA Property, Inc., illustrates that a release agreement executed upon employment termination may not offer blanket protection for employers against potential future ERISA or other claims that arise after termination (and after the release agreement has been executed). In Anastos, an employee sued his former employer alleging the information provided to him about the employer?ÇÖs retiree life insurance program led him to believe that no medical certification would be required to continue his life insurance coverage post-retirement. After the employee retired, his employer informed him that life insurance coverage was not available post-termination under the employer-provided plan and that, instead, he would have to convert the coverage to a whole life insurance policy with MetLife. MetLife required a medical examination before it would issue the policy, and the employee would not be able to satisfy the medical examination requirement. The employer filed a… Continue Reading

BREAKING: One-Year Limit on Suspended COBRA and Other Deadlines Applies On An Individual Basis

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.

DOL Issues Missing Participant Guidance

The DOL issued three pieces of guidance relating to missing participants in tax-qualified retirement plans. In response to the new guidance, described in more detail below, employers should again review their plan documents and any plan policies and procedures, to ensure they align with the DOL?ÇÖs requirements and best practices for avoiding and handling missing participants. In Field Assistance Bulletin No. 2021-01, the DOL issued a temporary enforcement policy on the use of the Pension Benefit Guaranty Corporation?ÇÖs (?Ç£PBGC?Ç¥) Defined Contribution Missing Participants Program for terminating defined contribution plans. Under the temporary enforcement policy, the DOL will not pursue violations under ERISA?ÇÖs fiduciary rules if the plan fiduciary of a terminating defined contribution plan transfers the benefits of missing participants to the PBGC under the program and otherwise follows the requirements of the DOL fiduciary safe harbor regulation at 29 CFR 2550.404a-3. In Compliance Assistance Release No. 2021-01, the DOL issued… Continue Reading

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 ?Ç£CAA?Ç¥) 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?ÇÖs participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any ?Ç£affected employees?Ç¥. ?Ç£Affected employees?Ç¥ are… Continue Reading

Want to Elect to Have a Safe Harbor Plan for 2021? ?Çô The Time is Now

As we previously reported here, earlier this year, the IRS provided relief to plan sponsors of safe harbor 401(k) and 403(b) plans, allowing them to amend their plans mid-year to suspend or reduce safe harbor contributions through the end of the 2020 plan year. Many employers elected to make this change in order to reduce overall costs to help them weather the COVID-19 pandemic. Plan sponsors who want to go back to a safe harbor plan design for 2021 must (i) amend their plan documents before the end of the year to include safe harbor contributions; (ii) notify their third party administrators as soon as possible so that the third party administrator is prepared to administer the plan as a safe harbor plan; and (iii) provide the required safe harbor notice to participants at least 30 days (and not more than 90 days) before the beginning of the plan year.… Continue Reading

The DOL Issues Guidance Regarding Lifetime Income Illustrations

The DOL recently issued an interim final rule (?Ç£IFR?Ç¥) pursuant to the Setting Every Community Up for Retirement Enhancement Act of 2019 (the ?Ç£SECURE Act?Ç¥) regarding the information that must be provided on pension benefit statements. ERISA requires plan administrators of defined contribution plans to provide periodic pension benefit statements to participants and certain beneficiaries. The SECURE Act requires plan administrators to provide annual statements illustrating participants?ÇÖ accrued benefits as two lifetime income stream illustrations: (i) a single life annuity, and (ii) a qualified joint and survivor annuity. The IFR describes certain required assumptions plan administrators must use when converting a participant?ÇÖs accrued benefit into lifetime income streams. The lifetime income stream illustrations must be accompanied by clear and understandable explanations of the assumptions underlying the illustrations. To assist plan administrators, the IFR provides model language that may be used to satisfy this explanation requirement. The IFR is effective September… Continue Reading

Changes to Safe Harbor Notices for Recipients of Eligible Rollover Distributions

The IRS recently issued Notice 2020-62 (the ?Ç£Notice?Ç¥), which modifies the two safe harbor explanations set forth in Notice 2018-74 that plan administrators may use to satisfy the requirements under Code Section 402(f) that plans provide certain information regarding eligible rollover distributions to participants, beneficiaries, and alternate payees who are receiving distributions. The modifications to these explanations reflect recent legislative changes, including those made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and include a new exception to the 10% additional tax for qualified birth or adoption distributions and the increase in age for required minimum distributions to age 72 for employees born after June 30, 1949. The Notice also includes an updated (i) model safe harbor notice for distributions that are not from a designated Roth account and (ii) model safe harbor notice for distributions that are from a designated Roth account. Plan… Continue Reading

IRS Provides Pandemic Relief to Safe Harbor Plans

Notice 2020-52 (the ?Ç£Notice?Ç¥) provides temporary relief allowing sponsors of ?Ç£safe harbor?Ç¥ 401(k) and 403(b) plans to amend their plans mid-plan year to suspend or reduce safe harbor contributions through the end of the plan year regardless of whether the employer (i) is suffering an economic loss, or (ii) included a statement in its annual safe harbor notice that safe harbor contributions could be reduced or suspended during the plan year. Plans that adopt an amendment to reduce or suspend safe harbor non-elective contributions in accordance with this Notice will not be treated as failing to satisfy the 30 day notice requirement in the regulations, provided that a supplemental notice is provided to the eligible employees no later than August 31, 2020, and the plan amendment that reduces or suspends the non-elective contributions is adopted no later than the effective date of the reduction or suspension. Plans that adopt an… Continue Reading

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