In our prior blog post here, we discussed the case of Anastos v. IKEA Property, Inc., which highlighted the importance of an employer’s 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
A recent federal district court case, Anastos 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’s 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
The DOL’s Employee Benefits Security Administration (the “EBSA”) recently released additional guidance on PTE 2020-02, Improving Investment Advice for Workers and Retirees, a new prohibited transaction exemption under ERISA that was adopted on December 18, 2020 (the “Exemption”) (see our prior blog posts about the Exemption here and here). The guidance consists of two documents: (i) a publication titled “Choosing the Right Person to Give You Investment Advice: Information for Investors in Retirement Plans and Individual Retirement Accounts” (the “Investor Guidance”), and (ii) a publication titled “New Fiduciary Advice Exemption: PTE 2020-02 Improving Investment Advice for Workers & Retirees Frequently Asked Questions” (the “Advisor Guidance”). The Investor Guidance provides information on the Exemption for investors and includes a list of questions for investors to ask their investment advice providers, as well as a list of investor-focused FAQs. The Advisor Guidance is compliance focused and includes a list of FAQs targeted… Continue Reading
Section 9705 of the American Rescue Plan Act of 2021 (“ARPA”) extends the amortization period for prior year shortfalls from seven to 15 years, beginning with the 2022 plan year (or, at the election of the plan sponsor, the 2019, 2020, or 2021 plan year). Section 9706 of the ARPA both modifies and extends the funding stabilization percentages for single employer defined benefit pension plans through 2029 and allows plan sponsors to elect whether to have these modified percentages apply for all purposes or solely for the purpose of determining the plan’s adjusted funding target attainment percentage. The plan sponsor may further elect whether to apply the modified percentages beginning with the 2020, 2021, or 2022 plan year. The ARPA is available here.
On March 10, 2021, the DOL released an enforcement policy statement (the “Statement”), which announced that until the DOL publishes further guidance, it will not enforce the recently issued “Financial Factors in Selecting Plan Investments” final rule (the “ESG Rule”) and the “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” final rule (the “Proxy Voting Rule”, together with the ESG Rule referred to herein as, the “Final Rules”). The ESG Rule generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors,” and the Proxy Voting Rule set forth a plan fiduciary’s obligations when voting proxies and exercising other shareholder rights in connection with plan investments. The implementation of the ESG Rule in particular has caused concerns for plan fiduciaries about the use of environment, social, and governance considerations in its investment decisions and has been met with increasing criticism from a… Continue Reading
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
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.
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 “CAA”) 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’s participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any “affected employees”. “Affected employees” are… Continue Reading
The IRS recently issued Notice 2020-86 (the “Notice”), which provides guidance through a series of questions and answers with respect to Sections 102 and 103 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). Section 102 of the SECURE Act increases the maximum automatic elective deferral percentage for automatic enrollment safe harbor plans from 10% to 15% (provided, however, that the maximum automatic deferral rate remains 10% during the initial period of automatic elective contributions). Notably, the Notice clarifies that a QACA safe harbor 401(k) plan is not required to increase the maximum percentage, so long as the percentage is (i) applied uniformly, (ii) does not exceed 15% (or 10% during the initial period of automatic elective contributions), and (iii) satisfies certain other minimum percentage requirements as described in Code Section 401(k)(13)(C)(iii). The Notice also clarifies that, if a plan incorporates the maximum qualified… Continue Reading
As reported by the U.S. Social Security Administration (the “SSA”), Norway finalized certain legal and operational changes to employer defined contribution pension plans to be effective January 1, 2021, which include: (i) eliminating vesting periods for employer contributions; (ii) permitting employees to select pension providers other than the ones chosen by their employers for administration of the employee’s defined contribution account balances; and (iii) unless an employee opts out, automatically transferring all of an employee’s account balances under his or her prior employer defined contribution plans into the employee’s account under his or her current employer’s defined contribution plan. Information on these changes is available on the SSA’s website here.