ADDITIONAL COVID-19 DISASTER RELIEF FOR RETIREMENT PLANS

In response to the COVID-19 pandemic, the U.S. Department of Labor (DOL) has announced emergency relief from certain deadlines and enforcement actions applicable to sponsors of ERISA-covered retirement plans.

On April 28, 2020, the DOL’s Employee Benefits Security Administration (EBSA) issued “Disaster Relief Notice 2020-01,” which provides plan sponsors with limited enforcement relief relating to various reporting and disclosure requirements under ERISA.

Specifically, the Notice extends the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by ERISA that otherwise would have been required to be delivered between March 1, 2020 and the 60-day period following the announced end of the COVID-19 National Emergency.  Furthermore, the Notice provides that an employee benefit plan and the responsible plan fiduciary will not be in violation of ERISA for a failure to timely deliver these required documents provided a “good faith effort” is made to furnish the required documents “as soon as administratively practicable.”

 According to the Notice, a “good faith effort” includes the use of alternative, electronic means of communicating with plan participants and beneficiaries, as long as the plan fiduciary reasonably believes that those participants and beneficiaries have effective access to email, text messages and continuous access to websites.

The Notice also includes compliance assistance guidance on plan loans, participant contributions and loan payments, blackout notices, Form 5500 and Form M-1 filing relief, and other general compliance guidance applicable to fiduciary responsibilities.

Below are some of the specifics of the Notice as they apply to retirement plans:

Participant Loans and Distributions

If an employee pension benefit plan fails to follow procedural requirements for plan loans or distributions as stipulated by the plan document, the DOL will not treat it as an operational failure if:

  • that failure is solely attributable to the COVID-19 pandemic;
  • the plan administrator makes a good-faith, diligent effort to comply with those requirements; and
  • the plan administrator makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable (e.g., spousal waivers for distributions and/or loans).

Deposit of 401(k) Deferrals

Normally, these deferrals must be forwarded to the plan on the earliest date on which they can reasonably be segregated from the employer’s general assets, but in no event later than the 15th 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 might not be able to comply with these requirements under the current circumstances.  Therefore, the DOL will not take enforcement action with respect to a temporary delay in forwarding such payments or contributions to a plan as long as employers and service providers act “reasonably, prudently, and in the interest of employees” to comply as soon as administratively practicable under the circumstances.  This relief from enforcement applies to payments or contributions that were withheld from March 1, 2020 to the end of the 60-day period following the announced end of the National Emergency.

DOL Notices

Applicable regulations provide for an exception to the 30-day advanced notice requirement for blackout periods when the delay is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing.  For this purpose, a blackout period represents a period of time extending beyond three (3) business days during which a participant cannot access their account or provide instructions to execute a transaction.

In this case, the DOL will not require the written determination by a fiduciary that adherence to the general blackout notice requirement was not possible, since a pandemic, by definition, is beyond a plan administrator’s control.

General Fiduciary Compliance

The guiding principle for plans must be to act reasonably, prudently, and in the interest of the covered employees and their beneficiaries; therefore, plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments and should attempt to minimize the possibility of plan participants losing benefits because of a failure to comply with pre-established timeframes.

The DOL will provide compliance assistance in the form of grace periods and other relief where appropriate, when physical disruption to a plan or service provider’s principal place of business makes compliance with pre-established timeframes for certain claims’ decisions or disclosures impossible.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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