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DOL Issues Proposed Rule to Amend the Investment Duties Regulation

The DOL?árecently issued a proposed rule to amend the ?Ç£investment duties?Ç¥ regulation at found at 29 CFR 2550.404a-1 (the ?Ç£Regulation?Ç¥). The proposed rule would provide investment guidance to ERISA plan fiduciaries in light of recent trends in environmental, social, and governance (?Ç£ESG?Ç¥) investing. ERISA requires plan fiduciaries to act ?Ç£solely?Ç¥ in the interest of plan participants and beneficiaries and for the ?Ç£exclusive purpose?Ç¥ of providing benefits and paying reasonable administrative expenses and prudently selecting investments for the plan. In the past, the DOL has periodically issued guidance addressing fiduciary duties under ERISA with respect to ESG-based investment decisions, including Interpretive Bulletin 94-1, which described a ?Ç£tie-breaker standard,?Ç¥ whereby ESG considerations could be the deciding factor when competing investments served the plan?ÇÖs economic interests equally. Later Interpretive Bulletins emphasized that it would be a violation of ERISA to accept reduced returns in favor of ESG goals, but that in certain cases,… Continue Reading

IRS Extends Deadline to Roll Over Waived RMD Distributions / Provides Model Amendment

The IRS issued Notice 2020-51 which provides additional guidance and relief relating to the required minimum distribution (?Ç£RMD?Ç¥) waiver provisions in Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). The CARES Act waived the requirement to make RMDs in 2020. Distributed amounts that?Çöbut for the CARES Act waiver?Çöwould have been RMDs are instead treated as eligible rollover distributions. Generally, the deadline to roll over an eligible rollover distribution into an IRA or another qualified plan is 60 days from the distribution date. However, for those eligible rollover distributions made in 2020 that otherwise would have been RMDs and for which the 60-day rollover period expires before August 31, 2020, the IRS extended the rollover deadline to August 31, 2020. Additionally, Notice 2020-51 includes a Q&A relating to the waiver of RMDs in 2020 and a model amendment that plan sponsors can adopt to provide… Continue Reading

Additional Federal Guidance Regarding COVID-19 and Telehealth Coverage: Some Employer Take-Aways

The U.S. Departments of Labor, Treasury, and Health and Human Services (the ?Ç£Departments?Ç¥) recently issued FAQs regarding the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and COVID-19. A number of these FAQs address a group health plan?ÇÖs required coverage of COVID-19 tests, including which tests must be covered, related facility fees, reimbursement rates, and balance billing to patients. Employers should ensure that the third party administrators of their group health plans have incorporated this guidance for plan administration purposes. In addition, some of the other FAQs may be of interest to employers. For example, the FAQs provide that, if a group health plan reverses the increased coverage of COVID-19 or telehealth after the COVID-19 public health emergency period is over, the Departments will consider the plan to have satisfied the requirement to provide advance notice of changes to the Summary of Benefits… Continue Reading

Have You Notified Participants of Extended Deadlines?

As noted in our prior post here, the U.S. Departments of Labor and Treasury recently issued a notice requiring all employee health and welfare benefit plans to disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency (or other announced date) when determining the deadline to request HIPAA special enrollment, elect COBRA coverage, make a COBRA premium payment, notify the plan of a COBRA qualifying event or determination of a disability, file a benefit claim or appeal, or request an external review of a benefit claim denial. Although the notice did not address whether plan participants needed to be notified of these extended deadlines, plan administrators should be aware that they likely have a fiduciary duty to accurately convey this information to participants. For example, a COBRA election notice that states a deadline to elect or make premium payments without mentioning… Continue Reading

The DOL Says Certain Private Equity Investments May Be Permissible Designated Investment Alternatives Under Individual Accounts Plans

On June 3, 2020, the DOL issued an information letter addressing the possibility of including a private equity type investment as a ?Ç£designated investment alternative?Ç¥ under a participant directed individual account plan. The DOL concluded that, as a general matter, ?Ç£a plan fiduciary would not . . . violate [ERISA?ÇÖs fiduciary duties] solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan in the manner described in [the] letter.?Ç¥ The DOL observed that private equity investments ?Ç£involve more complex organizational structures and investment strategies, longer time horizons, and more complex, and typically, higher fees?Ç¥ and they generally have ?Ç£different regulatory disclosure requirements, oversight, and controls?Ç¥ and ?Ç£often have no easily observed market value.?Ç¥ In addition to these considerations, the DOL listed several factors that plan fiduciaries should evaluate when considering whether a… Continue Reading

IRS Relief Allows Individuals to Make Participant Elections Electronically

Treasury Regulations ?º 1.401(a)-21(d)(6) requires participant elections, including spousal consents, to be witnessed in the physical presence of a plan representative or notary public.?á In light of the COVID-19 pandemic, the IRS recently issued Notice 2020-42 (the ?Ç£Notice?Ç¥) to allow individuals making participant elections to do so through electronic means for the period from January 1, 2020 through December 31, 2020.?á For participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a notary public, the ?Ç£physical presence?Ç¥ requirement is satisfied if remote notarization is done through live audio-video technology that otherwise satisfies the requirements of Treasury Regulations ?º 1.401(a)-21(d)(6) and is compliant with state law applicable to notaries.?á For participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a plan representative, the ?Ç£physical presence?Ç¥ requirement is satisfied if (i) the person signing the participant… 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

Spousal Consent Under a Retirement Plan During the COVID-19 Pandemic

Generally, a spouse must consent to a retirement plan participant?ÇÖs waiver of a qualified joint and survivor annuity or the designation of an optional form of benefit or an alternate beneficiary. The applicable regulations require this consent, even if signed electronically, to be witnessed in the physical presence of a plan representative or a notary public. Neither the IRS nor the DOL has issued guidance permitting the physical presence requirement to be satisfied by electronic means (for example, via webcam) even though numerous states now permit electronic notarizations. Employers should use care and consult with legal counsel when determining how to handle participants who are unable to satisfy the plan?ÇÖs current physical presence notarization requirements.

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