By Pension and Benefits Editorial Staff
The Department of Labor (DOL) has issued guidance for parties connected to ERISA-covered employee benefit plans that have been adversely affected by the Novel Coronavirus Disease (COVID-19) Outbreak. On March 13, 2020, President Donald J. Trump signed the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak (COVID-19 National Emergency). The DOL recognizes that the COVID-19 outbreak may temporarily impede efforts to comply with various requirements and deadlines under ERISA. This DOL guidance generally applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA from March 1, 2020, the beginning of the national emergency declared by the President, until 60 days after the announcement of the end of the COVID-19 National Emergency or other date announced by the Department in a future notice.
The DOL notes that this guidance has been coordinated with and reviewed by the Department of the Treasury, the IRS, and the Department of Health and Human Services (HHS).
ERISA Sec. 518 extension of certain timeframes. ERISA Sec. 518, as amended by section 3607 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) (P.L. 116-136), provides, in relevant part, that, in the case of an employee benefit plan, or any sponsor, administrator, participant, beneficiary, or other person related to a plan affected by a Presidentially declared disaster or a public health emergency declared by the Secretary of HHS, the Secretary of Labor may prescribe, by notice or otherwise, a period of up to one year that may be disregarded in determining the date by which any action is required or permitted to be completed. ERISA Sec. 518 further provides that no plan shall be treated as failing to be operated in accordance with the terms of the plan solely as a result of complying with the postponement of a deadline.
The DOL notes that it, along with the Treasury Department and the IRS, is publishing a separate joint notice in the Federal Register to announce an extension for a number of deadlines so plan participants, beneficiaries, and employers have additional time to make important decisions affecting benefits during the COVID-19 outbreak. For retirement, and other plans, the joint notice provides additional time for participants and beneficiaries to make claims for benefits and appeal denied claims.
In addition to the relief provided in the joint notice, the DOL is separately providing, in this guidance, an extension of deadlines for furnishing other required notices or disclosures to plan participants, beneficiaries, and other persons so that plan fiduciaries and plan sponsors have additional time to meet their obligations under Title of I ERISA during the COVID-19 outbreak. This extension applies to the furnishing of notices, disclosures, and other documents required by provisions of Title I of ERISA over which the DOL has interpretive and regulatory authority, except for those notices and disclosures addressed in the joint notice issued by the Department and the Treasury Department/IRS.
Under the DOL guidance, an employee benefit plan and the responsible plan fiduciary will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 National Emergency, if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. Good faith acts include use of electronic alternative means of communicating with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication, including email, text messages, and continuous access websites, according to the DOL.
Verification procedures for plan loans and distributions. The DOL will not treat an employee pension benefit plan as failing to follow procedural requirements for plan loans or distributions imposed by the terms of the plan solely because the failure is attributable to the COVID-19 outbreak, the plan administrator makes a good-faith diligent effort under the circumstances to comply with those requirements, and makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as practicable.
The DOL cautions that this relief for verification procedures imposed by the terms of the plan is limited to verification requirements required under provisions of Title I of ERISA that are within the interpretive and regulatory authority of the Department, and, for example, does not include spousal consent or other statutory or regulatory requirements under the jurisdiction of the Treasury Department/IRS.
Participant loans under CARES Act. Section 2202(b)(1) of the CARES Act provides that, during the period beginning on March 27, 2020, and ending on September 22, 2020 (the “loan relief period”), in applying Code Sec. 72(p) to a plan loan of a qualified individual, the $50,000 aggregate limit in Code Sec. 72(p)(2)(A)(i) is increased to $100,000 and the limit in Code Sec. 72(p)(2)(A)(ii) on the aggregate amount of loans is increased from one-half of the employee’s vested accrued benefit to 100% of the employee’s vested accrued benefit.
Section 2202(b)(2) of the CARES Act provides that any repayment of a plan loan made to a qualified individual that is due during the period beginning on March 27, 2020 and ending December 31, 2020, may be delayed for up to one year without violating Code Sec. 72(p) if subsequent repayments are adjusted to reflect the delay in the manner described in section 2202(b)(2)(B) of the CARES Act.
The DOL has advised the Treasury Department and IRS that it will not treat any person as having violated the provisions of Title I of ERISA, including the adequate security and reasonably equivalent basis requirements in ERISA Sec. 408(b)(1) and ERISA Reg. Sec. 2550.408b-1, solely because: (1) the person made a plan loan to a qualified individual during the loan relief period in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance; or (2) a qualified individual delayed making a plan loan repayment in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance.
Certain plan amendments related to COVID-19 outbreak. If an employee pension benefit plan is amended to provide the relief for plan loans and distributions described in section 2202 of the CARES Act, the DOL will treat the plan as being operated in accordance with the terms of the amendment prior to its adoption if: (1) the amendment is made on or before the last day of the first plan year beginning on or after January 1, 2022, or such later date prescribed by the Secretary of the Treasury (or the Secretary’s delegate), and (2) the amendment meets the conditions of section 2202(c)(2)(B) of the CARES Act.
Participant contributions and loan repayments. Participant contributions and loan repayments become plan assets when they are paid to employers or withheld from participants’ wages by employers and are required to be forwarded to the pension plans on the earliest date they can be reasonably segregated from the employers’ general assets. In any event, these contributions and loan repayments must be forwarded to the plans no later than the fifteenth business day of the month following the month in which the amounts were paid to or withheld by the employer.
The DOL recognizes that some employers and service providers will not be able to forward participant contributions and withholdings within the required timeframes during the period beginning on March 1, 2020 and ending on the 60th day following the announced end of the National Emergency. The DOL will not, solely on the basis of a failure attributable to the COVID-19 outbreak, enforce ERISA Title I provisions because of a temporary delay in forwarding these contributions or payments to the extent that these parties act reasonably, prudently, and in the interest of employees to comply as soon as it is practical to do so.
Blackout notices. Under ERISA Sec. 101(i) and regulations, administrators of individual account plans are required to provide 30 days advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by a blackout period (i.e., a period of suspension, limitation or restriction of more than three consecutive business days on a participant’s ability to direct investments, obtain loans, or obtain other distributions from the plan). There is an exception to the advance notice requirement when the inability to provide the advance notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing.
The above relief under ERISA Sec. 518 applies to blackout notices that are required to be provided, including those required to be provided after the blackout period begins. Further, the DOL will not require the written determination by a fiduciary for blackout notices covered by this guidance, as pandemics are, by definition, beyond a plan administrator’s control.
ERISA claims compliance. The DOL states that plan participants and beneficiaries may encounter a variety of problems due to covered disasters. The DOL explains that the guiding principle for plans must be to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in payment of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.
In addition, the DOL acknowledges that there may be instances when full and timely compliance with claims processing and other ERISA requirements by plans and service providers may not be possible. According to the DOL, its approach to enforcement will emphasize compliance assistance and includes grace periods and other relief, where appropriate, including when physical disruption to a plan or service provider’s principal place of business makes compliance with pre-established deadlines for certain claims decisions or disclosures impossible.
Contact information. The DOL states that it will continue to monitor the situation as appropriate. For more information, see the Employee Benefits Security Administration’s (EBSA’s) Disaster Relief pages for employers, advisers, workers, and families, or contact the EBSA at https://www.dol.gov/agencies/ebsa/about-ebsa/ask-a-question/ask-ebsa, or call 1-866-444-3272. Direct questions about IRS guidance to the IRS at 1-877-829-5500.
FAQs. The DOL has issued Frequently Asked Questions (FAQs) to help employee benefit plan participants and beneficiaries, as well as plan sponsors, and employers, impacted by the COVID-19 outbreak understand their rights and responsibilities under Title I of ERISA. The FAQs cover health plan benefits and retirement plan benefits.
Source: EBSA Disaster Relief Notice 2020-01; COVID-19 FAQs for Participants and Beneficiaries.
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