Plan participants now enroll, change elections, review benefits, apply for plan loans and hardship distributions, and access account information through websites and cellphone apps. As electronic access to plan information has increased, so has the interest of hackers in obtaining the wealth of information stored electronically. Recently, the DOL’s Employee Benefits Security Administration (the “EBSA”) issued the following cybersecurity guidance documents to help plan sponsors comply with their duties to protect plan information: Tips for Hiring a Service Provider with Strong Cybersecurity Practices: These tips are intended to help plan sponsors and plan fiduciaries meet their duties under ERISA to prudently select and monitor service providers. They include a list of questions to ask and considerations to make when evaluating potential service providers. Cybersecurity Program Best Practices: This guidance provides a list of 12 best practices intended to help plan fiduciaries mitigate cybersecurity risks and make prudent decisions when selecting… Continue Reading
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
Last week’s decision by the U.S. Court of Appeals for the Fifth Circuit in Atkins v. CB&I, LLC is a reminder that employers may prefer to structure bonus and severance programs so as to be covered by ERISA and thus avoid being subject to unfavorable state laws. In Atkins, five employees brought suit in Louisiana state court claiming their employer’s project incentive bonus plan—which pays a single bonus payment to employees who are laid off or complete their roles in a specific project—constituted an illegal wage forfeiture agreement under the Louisiana Wage Payment Act. Each of the employees had quit and consequently forfeited their bonuses under the plan’s terms. The employer removed the suit to federal district court claiming the bonus plan was a severance plan subject to ERISA and thus ERISA, as controlling federal law, preempted the employees’ state law claims. The district court agreed. The Fifth Circuit reversed… Continue Reading
Beginning on April 1, 2021, the American Rescue Plan Act of 2021 (“ARPA“) will provide a 100% COBRA premium subsidy (the “Subsidy”) to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or reduction in hours of employment. Under the ARPA, the federal government will reimburse the employer, in the form of a tax credit, the cost of the premiums for up to six months, from April 1 to September 30, 2021. Specifically, the Subsidy will end on the earliest of: (i) September 30, 2021; (ii) the date the qualified beneficiary becomes eligible for other health plan coverage or Medicare; or (iii) the date the qualified beneficiary’s COBRA coverage period ends. Further, any individual who would have been eligible for the Subsidy, had he or she previously elected, or continued, COBRA coverage, will have another opportunity to elect COBRA coverage under a special… Continue Reading
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
The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain ERISA violations. The adjusted penalty amounts apply to penalties assessed after January 15, 2021 and for which the associated violations occurred after November 2, 2015. Some of the penalties that were increased include the following: The maximum penalty for failing to properly file a pension or welfare benefit plan’s annual Form 5500 increased from $2,233 per day to $2,259 per day. The maximum penalty for failing to provide notices of blackout periods or of the right to divest employer securities increased from $141 per day to $143 per day (each statutory recipient is a separate violation). The maximum penalty for failing to provide employees the required Children’s Health Insurance Program (CHIP) coverage notices increased from $119 per day to $120 per day (each employee… Continue Reading
The safe harbor rules for hardship withdrawals from a retirement plan permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (“FEMA”) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, provided the participant’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA issued a series of disaster declarations as a result of the February 2021 winter storms that impacted portions of Texas, Louisiana, and Oklahoma. A list of counties that have been designated by FEMA for individual assistance in those states can be found on FEMA’s website here. Those disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or work… Continue Reading
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.
In 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) was enacted. The Act is part of the Consolidated Appropriations Act of 2021. The Act provides employer sponsors of cafeteria plans, including health flexible spending accounts (“HFSAs”) and dependent care flexible spending accounts (“DCFSAs”) (collectively, “FSAs”), with helpful new options for easing the normal FSA use-it-or-lose-it and mid-year election change rules. Generally, the Act provides for (i) flexibility with respect to carryovers of unused FSA amounts from the 2020 and 2021 plan years (“Enhanced Carryover”); (ii) extension of the permissible period for incurring FSA claims for plan years ending in 2020 and 2021 (“Enhanced Grace Period”); (iii) a special rule regarding post-termination reimbursements from HFSAs during plan years 2020 and 2021 (“HFSA Post-Termination Option”); (iv) a special claims period and carryover rule for DCFSAs when a dependent “ages out” during the COVID-19 public health emergency; and… Continue Reading
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.