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New Legislation Extends Relief for Telehealth Coverage Prior to Satisfying HDHP Deductible

The Consolidated Appropriations Act of 2022 (“CAA”), enacted on March 15, 2022, extends the optional relief previously provided under the CARES Act regarding the ability of a high deductible health plan (“HDHP”) to cover telehealth services without application of the deductible. Under the CARES Act relief, which applied to plan years beginning on or before December 31, 2021, a participant in an HDHP that adopted the relief could obtain pre-deductible telehealth services without compromising his or her ability to make contributions, or have contributions made, to a health savings account. See our prior blog post about the CARES Act relief here. The extension of the telehealth relief under the CAA is not retroactive to January 1, 2022, but instead is effective only for months beginning after March 31, 2022, and before January 1, 2023, thus creating a gap in the relief for calendar year plans (and certain non-calendar year plans)… Continue Reading

Eleventh Circuit Affirms Summary Judgment Because ERISA Plan Included Unambiguous Reservation of Rights Language

In Klaas v. Allstate Ins. Co., Allstate sponsored an employee welfare benefit plan subject to ERISA that paid life insurance premiums for certain retirees. Allstate made various representations that this benefit would continue for the remaining lives of the retirees. In 2013, Allstate informed the retirees that it would stop paying their life insurance premiums. The retirees sued alleging Allstate violated ERISA by no longer paying those premiums after making representations that the benefit would continue for a lifetime. The Eleventh Circuit affirmed the district court’s ruling, holding that no ERISA violation occurred because Allstate’s plan documents contained a no-vesting clause and an unambiguous reservation of rights provision that gave Allstate the right to modify or terminate retiree life insurance at any time.  This case is a good reminder to pay careful attention to what insurers and third-party administers put into your plan documents. Unlike retirement plans subject to ERISA,… Continue Reading

Retirement Plan Death Beneficiary Provisions that Reduce Potential Liability

When a retirement plan participant dies without a valid beneficiary designation on file, death benefits will typically be paid pursuant to the plan’s default beneficiary provisions. These provisions should be drafted to avoid placing an undue burden on the plan administrator (which is often the plan sponsor). When the plan document requires the plan administrator to determine a participant’s heirs, the process of administering the death benefit can be costly and time-consuming and may lead to the risk that the plan will have to pay a duplicate benefit. For example, a duplicate payment could result because children from a previous marriage were overlooked, the participant remarried after terminating employment, or competing heirs provide incomplete or misleading information. However, plans can be drafted to provide that the default beneficiary is the participant’s surviving spouse, and if there is no spouse, the participant’s estate. If the estate is not probated, the risk should be shifted from… Continue Reading

Recent IRS Snapshot Regarding Deemed Distributions for Participant Loans Reminds Employers of Risk of Plan Loan Errors

The IRS recently released an Issue Snapshot (the “Snapshot”) focusing on participant loans from retirement plans and when certain compliance errors could trigger deemed distributions with respect to such loans. Specifically, the Snapshot lists the following requirements, which if not satisfied, will cause a participant loan to be treated as a deemed distribution: Enforceable agreement requirement, which generally requires a participant loan to be a legally enforceable agreement (which may include more than one document) and the terms of the agreement demonstrate compliance with the applicable requirements of the Code. Maximum loan amount limit requirement, which generally limits the maximum amount of a participant loan to the amount specified under the Code. The Snapshot also noted the CARES Act allowed modifications to the loan limit for certain loans to “qualified individuals.” Repayment period requirement, which generally requires the repayment period of a loan be limited to five years, unless the loan… Continue Reading

Benefit Compliance Tip: Be Sure to Sign on the Dotted Line

Benefit plan administration can be complicated and challenging, but sometimes it is not the complex issues that cause the biggest problems; it’s the simplest, such as remembering to ensure plan documents and amendments are actually signed. Far too often, when new plans or plan amendments are adopted, the board or a plan committee will adopt resolutions approving the new plan or amendment, but the actual documents are never signed. Unfortunately, this area of non-compliance may go unnoticed until an IRS or DOL audit or the sale of the plan sponsor, where signed documents are requested but the plan sponsor cannot find them. To avoid being caught with unsigned plan documents, plans sponsors should: Adopt procedures so that immediately after new plans or amendments are adopted, the documents are signed and dated by an authorized signer; After documents are signed, maintain the executed documents in an easy to find location, and… Continue Reading

As Plan Administrator, the Employer is Liable – Not the Service Provider (i.e., What Kind of Indemnification Are You Getting?)

The plan administrator of an employee benefit plan (employee welfare or retirement) has the general fiduciary responsibility under ERISA to ensure the operational and documentary compliance of the plan. Under ERISA, the sponsoring employer is the plan administrator unless another person or entity is named in the plan. This generally means the employer retains ultimate responsibility and liability for legal compliance even though the employer may rely heavily on the plan’s third-party service providers. One way to mitigate this liability is to obtain indemnification from a service provider for the service provider’s errors, for which the employer (as plan administrator) would still be legally liable. The default language in third-party service provider contracts often provides indemnification only for the service provider’s “gross negligence”, but not its “ordinary negligence”, thus leaving the employer responsible for correcting (and paying for) errors caused by the service provider that do not amount to “gross negligence” or “intentional… Continue Reading

IRS Explains Certain Plans Retroactively Adopted After the End of Plan Year Are Not Required to File a Form 5500 for 2020

The IRS recently explained in an announcement that certain retirement plans adopted after the close of the employer’s taxable year will not be required to file a Form 5500 for 2020. Specifically, under the SECURE Act, an employer may adopt a retirement plan after the close of the employer’s taxable year (by the due date, including extensions, for filing its tax return for the taxable year) and elect to treat the plan as having been adopted as of the last day of the taxable year. This provision of the SECURE Act only applies to plans adopted for taxable years beginning after December 31, 2019. In its announcement, the IRS explained that if an employer adopted a plan during the employer’s 2021 taxable year, by the specified deadline, and elected to treat the plan as having been adopted as of the last day of the employer’s 2020 taxable year, then the… Continue Reading

ERISA Lawsuit Alleging Worker Misclassification Is A Reminder to Employers to Monitor Their Employee Classifications

A plaintiff recently filed suit against Yum! Brands, Inc. (“Yum”), Taco Bell Corp. (“Taco Bell,” together with Yum referred to herein as, the “Employers”), and various other defendants under ERISA over the alleged misclassification of his employment status. The complaint states that common law employees were eligible to participate in certain retirement plans maintained by the Employers (collectively, the “Plans”) pursuant to the Plans’ governing documents. The plaintiff alleges he met the common law test for employee status but was classified as an independent contractor, instead of an employee, during his 25 years of employment. Specifically, the plaintiff alleges that during the relevant employment periods, the Employers controlled the work he performed and the manner and means by which he performed his work, such as by directing the specific order and sequence of his work and requiring him to attend employee-only events and meetings. The plaintiff further alleges that other… Continue Reading

Nothing in Life is Free ?Çô ERISA Expense Account Considerations

Many 401(k) plans contain spending accounts funded by revenue-sharing generated by a plan?ÇÖs mutual fund holdings. These accounts, often referred to as ERISA expense accounts, revenue-sharing accounts, or plan expense reimbursement accounts, can cause complications for plans if not administered properly. These revenue-sharing accounts can accumulate quickly, and in large plans, can result in hundreds of thousands of dollars each year. However, plan sponsors often do not know that the accounts are accumulating, and when they find them, may think they have just discovered ?Ç£free money.?Ç¥ But nothing in life is free, and missteps with the use of these funds could result in participant claims. Accordingly, before utilizing these funds, plan sponsors should use care and consider the following questions: Are the funds being held in the trust??áDOL Advisory Opinion 2013-03A (which is available here) noted that revenue sharing payments that were being received by the third party administrator prior… Continue Reading

IRS Publishes Updated Operational Compliance Checklist

The IRS recently updated its Operational Compliance Checklist (the ?Ç£Checklist?Ç¥) to include qualification requirements that will become effective during the 2021 and 2022 calendar years. Examples of items added to the Checklist for 2021 and 2022 include, among other things: Final regulations relating to updated life expectancy and distribution tables used for determining minimum required distributions; The SECURE Act requirement that qualified cash or deferred arrangements must allow long-term employees (i.e., employees who work at least 500 but less than 1,000 hours per year for three consecutive 12-month periods beginning on or after January 1, 2021) to participate; and Temporary relief from the physical presence requirement for spousal consents under qualified retirement plans. The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance. The Checklist does not, however, include routine, periodic changes, such as cost-of-living increases, spot segment rates, and applicable mortality tables,… Continue Reading

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