DOL COVID-19 Guidance for Benefit Plans
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The economic impact of the COVID-19 emergency has created challenging circumstances for many businesses. The abrupt implementation of stay at home orders combined with forced business closures left many with no way to generate sales or provide services. The impact is clear: 3.2M unemployment claims were filed for the week ending May 1, 2020. The claim number shows just how deeply businesses and individuals have been impacted and the tough decisions being made. Congress has attempted to help through various legislation, including the Coronavirus Aid, Relief and Economic Security (CARES) Act that offers tax and compliance relief, new loan programs, and changes to benefit plan rules. The confluence of these efforts and the current business landscape has left many unable to meet filing deadlines, including those required under ERISA. The good news is the Department of Labor (DOL) recently issued EBSA Disaster Relief Notice 2020-01, providing plan sponsors with much-needed breathing room. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key details below.
Notice, Disclosures & Other Communications
Under this Notice, the Employee Benefits Security Administration (EBSA) provides extension relief for the furnishing of notices, disclosures, and other documents required of Title 1 of ERISA, over which the DOL has regulatory authority. It allows sponsors and fiduciaries relief for a failure to timely furnish a notice, disclosure, or document that must be provided between March 1, 2020, and 60 days after the end of the emergency. This assumes the plan acts in good faith and provides the information as soon as is practical under the circumstances. Good faith acts include the use of alternative electronic communication methods with participants and beneficiaries whom the plan fiduciary believes have access to electronic communication, including emails, text messages, and web access.
Plan Loans & Distributions
Employee pension benefit plans that fail to follow procedural requirements for plan loans or distributions required under the terms the plan, the DOL will not treat it as a plan failure assuming the conditions outlined below are met.
- The failure is solely attributable to the COVID-19 outbreak.
- The plan administrator makes a diligent effort to comply with all requirements.
- The administrator makes a reasonable attempt to correct any process issues, including compiling missing documentation as soon as administratively practical.
Plan Amendments – COVID-19 Outbreak
Should an employer decide to amend its plan to provide relief for plan loans and distributions as permitted under CARES, the DOL will treat a plan as being operated in accordance with the terms of such amendments assuming the following conditions are met:
- The amendment is adopted on, or before, the last day of the first plan year beginning on or after January 1, 2022, and,
- It meets the necessary conditions outlined in the CARES Act.
Participant Contributions & Loan Repayments
Regulations state that amounts withheld from a participant’s wages by an employer, as a plan contribution or for loan repayment, must be forwarded to the plan no later than the 15th business day of the month following the month in which the withholding was made. Given that some employers may not be able to comply, the DOL will not take enforcement action (solely based on a failure attributable to the COVID-19 emergency). It is important to note it’s expected that both the service provider and employers must act reasonably and in the interest of employees to comply as soon as possible under the circumstances.
The Notice also includes broad instructions about how other ERISA compliance failures will be treated. It is important for plans to act reasonably and in the best interest of the participant. Given the unique circumstances, enforcement will emphasize compliance assistance and grace periods as appropriate, including when physical disruption or access to a provider’s place of business makes compliance impossible.
The extensions and relief provided by the DOL is welcome news for many who have been challenged during the emergency. It permits time to deal with the bevy of other issues and challenges requiring immediate attention. If you have questions about the information outlined above or need assistance with a plan administration or audit issue, JLK Rosenberger can help. For additional information, call us at 972-931-6803 or click here to contact us. We look forward to speaking with you soon.