The IRS has extended the plan amendment deadlines for all changes under the CARES Act, Miners Act, and SECURE Act to a single date.
The IRS issued Notice 2022-33, extending plan amendment deadlines for up to three years with respect to certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Bipartisan American Miners Act of 2019 (the Miners Act), and the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
In June 2022, the IRS launched a pre-examination pilot program for retirement plans that could help employers avoid costly penalties. The program aims to reduce the burden of, and time spent on, retirement plan audits, which are typically a time consuming endeavor for plan sponsors. The program ultimately should be good news for plan sponsors in terms of both financial penalties and, presumably, a more efficient audit process.
The SECURE Act added a new disclosure requirement for sponsors of defined contribution plans that becomes effective this year. Plan sponsors of ERISA-covered defined contribution plans must provide participants with a lifetime income disclosure (at least annually) which estimates the monthly income that a participant’s account balance could produce if paid in the form of a qualified joint and survivor annuity or single life annuity stream of payments, rather than a lump-sum.
For participant-directed plans, the initial lifetime income disclosures must be incorporated into benefit statements no later than June 30, 2022. For plans under which participants do not direct the investment of their account, the disclosures must be on the statement for the first plan year ending on or after September 19, 2021. For most plans, this will be October 15, 2022.
In addition to $600 checks for most Americans, the year-end COVID-19 stimulus package signed by the President on December 27, 2020, includes a new round of changes that employers will need to track for their employee benefit plans. The Consolidated Appropriations Act, 2021 (H.R. 133) (the “Act”) is the fourth major legislative attempt to provide relief to businesses and individuals facing economic hardship due to the COVID-19 pandemic. Although lacking a catchy acronym (like the “CARES” and “SECURE” Acts), this legislation makes the most significant changes to health plans since the Affordable Care Act, offers employers and employees additional flexibility for cafeteria plan benefits, and provides additional retirement plan relief.
The IRS has granted additional, albeit temporary, COVID-19-related relief for sponsors of “safe-harbor” 401(k) and 403(b) plans (i.e., plans that are exempt from one or both of the ADP and ACP nondiscrimination tests). Notice 2020-52, which was issued on June 29, 2020, provides temporary relief from the current requirements for mid-year amendments to such plans, and provides additional clarification regarding mid-year amendments to safe-harbor plans that only affect highly compensated employees. This guidance is welcome relief for plan sponsors who feel the financial need to reduce or suspend employer contributions under these plans, but who may not be able to satisfy the current regulatory requirements for mid-year amendments.
The Department of Labor (DOL) has now finalized its October 2019 proposal (described in our previous blog) to create a new “safe harbor” for the electronic distribution of ERISA-required notices and disclosures. The final regulation establishes a new, voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to participants and beneficiaries, rather than providing paper documents through mail or hand delivery. The new safe harbor permits electronic delivery by either (i) posting covered documents on the plan sponsor’s website, if appropriate notification of internet availability is furnished to the participant’s electronic address, or (ii) sending the documents directly to the participant’s electronic address, with the covered document either in the body of the e-mail or as an attachment thereto. Although the final rule is not effective until 60 days after its publication in the Federal Register, the DOL has indicated that it will not take any enforcement action against a plan administrator that relies on the safe harbor before that date.
The Department of Labor’s Employee Benefits Security Administration issued guidance on April 28, 2020, providing temporary, coronavirus-related relief from many deadlines and requirements under ERISA. Notably, the guidance relaxes the standards for employers to provide notices electronically, and affords significant latitude to COBRA qualified beneficiaries for electing, and paying for, COBRA continuation coverage.
A third round of relief from the coronavirus pandemic has made its way through the Senate and House and has been signed by President Trump. The Coronavirus Aid, Relief and Economic Security (or “CARES”) Act provides over $2 trillion in relief for businesses and individuals. It also offers new avenues for defined contribution retirement plan participants to withdraw funds from their accounts in order to pay COVID-19-related expenses, if their employer elects to open those avenues. Some of the largest 401(k) and 403(b) plan record keepers are forcing employers to make that choice on just a few days’ notice.
The recent turmoil in the financial markets, while troubling for individual investors, also has potentially significant implications for ERISA fiduciaries. Individuals and committees who have investment authority over plan assets should reevaluate their portfolios in light of these developments. Circumstances may not require a change in investment strategy, but ERISA’s prudence requirement requires fiduciaries to give immediate, thoughtful consideration to how those circumstances have changed.