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Voluntary Correction Program Applications – Best Practices

The IRS recently issued a list of the top errors it finds in Voluntary Correction Program (“VCP”) submissions, which is available here. The errors listed generally relate to issues associated with the submission of files in the correct PDF format, failing to pay the correct user fee, or the incorrect submission of the Form 8950. Filing a VCP application can be a useful method for plan sponsors to correct operational issues that have spanned numerous years or  other issues for which self-correction is unavailable. Errors in the submission can delay resolution of the application or, in some cases, cause a rejection of the application. In addition to the common errors outlined by the IRS, plan sponsors should also use care to avoid the following additional common issues: Failure to Submit a Comprehensive Filing – If one operational error is found, plan sponsors should conduct a self-audit prior to filing a… Continue Reading

IRS Announces that Purchases of Personal Protective Equipment are Tax Deductible

In Announcement 2021-7 (the “Announcement”), the IRS clarified that the costs to purchase personal protective equipment (“PPE”), such as masks, hand sanitizers, and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19, are tax deductible as a medical expense. Specifically, the amounts paid for PPE will be treated as amounts paid for medical care under Section 213(d) of the Internal Revenue Code. The costs of PPE are also eligible to be paid or reimbursed by health flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, and health savings accounts. However, if the PPE expense is paid or reimbursed by such an arrangement or account, then the expense will not be tax deductible as a medical expense. The IRS also stated that group health plans may be amended to provide for the reimbursement of PPE expenses incurred for any period beginning on or after January 1, 2020… Continue Reading

Big Increase in Dependent Care Flexible Spending Account Limit for 2021

The American Rescue Plan Act of 2021 (“ARPA”), which was enacted on March 11, 2021, temporarily increases the maximum amount that an employee is permitted to contribute to a dependent care flexible spending account (“FSA”) from $5,000 to $10,500 (or from $2,500 to $5,250 for a married person filing a separate return) for the taxable year beginning in 2021. The increased dependent care FSA limit is an optional change that a plan sponsor may choose to incorporate into its dependent care program included under its cafeteria plan. This change, combined with the change under the Consolidated Appropriations Act, 2021 (“CAA”), which authorizes a cafeteria plan to permit participants to make prospective changes to their dependent care FSA contributions (see our prior blog post regarding the CAA here), allows participants to increase contributions to their dependent care FSAs in 2021. In order to implement the new dependent care FSA limit, the… 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.  This means those deadlines do not resume running as of March 1, 2021.  Instead, each individual has up to a one-year suspension as long as the COVID-19 national emergency continues.  As discussed in our prior blog post here, it was unclear whether those deadlines were to resume running as of March 1, 2021.  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.

Upcoming Compliance 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.  As of February 10, 2021, an employer-sponsored group health plan that imposes nonquantitative treatment limitations (“NQTLs”) 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.

Required Minimum Distributions: A Tragedy in Three Acts

The SECURE Act and CARES Act made significant changes to required minimum distributions (“RMDs”). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70½.  Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70½ to age 72, but only for individuals who turned age 70½ on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70½, while those… Continue Reading

Plan Record Retention Considerations in Corporate Transactions

As we’ve previously reported here, there are a number of record retention requirements applicable to employee benefit plans. Plan sponsors should be mindful of the impact and application of these requirements in the context of corporate mergers and acquisitions, especially if assets of the target’s retirement plan are to be merged into the buyer’s plan. When acquiring a company that sponsors (or has sponsored) its own retirement plan, plan sponsors should consider: Protected Benefits. Though the buyer’s plan may be amended to protect certain benefits under the target’s plan, as required by the Internal Revenue Code, in many cases the plan sponsor will need to refer to the target’s actual plan document to fully understand the specifics of the protected benefits. Missing Participants. The DOL recently issued a memorandum outlining best practices for pension plans to avoid and resolve missing participant issues (we previously discussed this issue here). Included in… Continue Reading

Before Cleaning Out Files, Brush Up on Record Retention Requirements

Our world is filled with paper and electronic records, and the HR departments at most companies are no exception. Enrollment forms, notices, plan documents, summary plan descriptions, benefit statements, and service records are just a few of the records that fill the HR department’s file cabinets and computer storage. While it might be tempting to clean out files, plan sponsors should exercise care before disposing of any files relating to benefits under a plan. A clean desk today could create headaches tomorrow. Generally, ERISA requires an employer to retain plan records to support plan filings, including the annual Form 5500, for at least six years from the filing date (ERISA §107) and to maintain records for each employee sufficient to determine the benefits due or that may become due to such employee (ERISA §209), with no time limit on such requirement. In addition, HIPAA requires retention of the policies and… Continue Reading

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’s 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’s (“PBGC”) Defined Contribution Missing Participants Program for terminating defined contribution plans. Under the temporary enforcement policy, the DOL will not pursue violations under ERISA’s 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

Future Updates on the Consolidated Appropriations Act of 2021

We previously provided an overview of the Consolidated Appropriations Act of 2021 (the “CAA”) and the specific benefits changes employers need to focus on right now, which can be found here. There were numerous other provisions of the CAA that will impact retirement and group health plans. As the effective dates for those other provisions approach, we will provide you with a summary of the new provisions and how they may impact your plans.

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