Delay of Key Participant and Plan Deadlines: Retirement Plans

Yesterday, the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), coordinated with the Department of the Treasury, Internal Revenue Service (IRS), and Department of Health and Human Services, issued EBSA Disaster Relief Notice 2020-01 (Notice) extending key participant and plan deadlines, including the April 30 deadline to provide annual funding notices. The DOL also issued related COVID-19 Frequently Asked Questions (FAQs) for participants and beneficiaries and, with the IRS, issued new final regulations.

This alert focuses on the retirement plan relief in the Notice, the FAQs and the final regulations; we will issue a separate alert addressing the aspects of the Notice, FAQs, and the final regulations affecting health and welfare plans.

Notice

The Notice provides a variety of administrative relief to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants, beneficiaries, and service providers subject to ERISA and is effective from March 1, 2020, until 60 days after the announcement of the end of the COVID-19 national emergency or such other date announced by the DOL (Relief Period).

The Notice provides the following relief to qualified retirement plans:

1. Extension of Required Notices and Disclosures Deadlines – 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 during the Relief Period, 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.
2. Plan Loan and Distribution Procedural Requirements – The Notice provides relief regarding the procedural requirements for issuing loans and distributions to participants during the Relief Period.

   The DOL will not treat it as a failure to follow these plan procedures if:

   • The failure is solely attributable to the COVID-19 outbreak;
   • The plan administrator makes a good-faith diligent effort under the circumstances to comply with the plan loan or distribution procedures; and
   • The plan administrator makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable.

   However, this relief does not apply to any required spousal consents or other statutory or regulatory requirements under the jurisdiction of the Treasury Department or IRS.

3. Participant Contributions and Loan Repayments – Generally, participant elective deferrals and loan repayments must be submitted to the plan on the earliest date on which such amounts may 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 withheld from the participant. The Notice states that, during the Relief Period, the DOL will not take enforcement action with regard to contributions that are temporarily delayed beyond these deadlines so long as the delay is solely due to complications having to do with the COVID-19 outbreak. Employers must still act reasonably, prudently, and in the interest of participants to comply as soon as reasonably practicable under the circumstances.
4. CARES Act Loan Provisions – The Notice provides verification that the DOL will not treat any person as having violated ERISA’s qualified plan loan requirements, including the adequacy of security and reasonable equivalency of basis requirements, solely because a plan implements the increased loan limits and suspension of loan payment provisions of the CARES Act.
5. Blackout Notices – A plan administrator generally must provide a blackout notice to participants and beneficiaries 30 days in advance of any blackout period. However, an exception is available if there is an inability to provide the blackout notice within the prescribed period due to events beyond the control of the plan administrator and a fiduciary so determines in writing. The DOL will not require this written determination for any blackout notices covered by the Notice, as pandemics are by definition beyond a plan administrator’s control.

Regulations

The final regulations issued by the DOL and IRS make important changes to claims procedures for retirement plans subject to ERISA. Specifically, when calculating the deadlines for participants to submit claims for benefits or appeals of adverse benefit decisions, the Relief Period must be disregarded. This provides an extension of time for participants to file claims for benefits or to appeal adverse benefit determinations. At this time, the end of this extension is unknown as it is dependent on a further announcement of the end date of the Relief Period.

FAQs

The DOL also issued a set of FAQs for participants in employer-sponsored benefit plans. Many of the questions relating to retirement plans have to do with how participants can request distributions or information about their retirement plan benefits. Several of the answers included with these questions direct participants to reach out to the plan administrator. Therefore, plan sponsors should expect an uptick in calls from retirement plan participants.