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On May 18, 2021, the IRS furnished much-needed guidance to employers on how to implement the COBRA premium subsidy provisions under the American Rescue Plan Act (ARPA). Notice 2021-31 includes more than seven dozen Q&As, which cover topics including eligibility requirements, applicable coverage periods and limitations, and notice and election procedures.

As summarized in our prior post, ARPA includes a 100% COBRA premium subsidy for “assistance eligible individuals” who elect (or who previously elected) COBRA continuation coverage for the period from April 1, 2021 through September 30, 2021. “Assistance eligible individuals” are generally those whose terminations occur as a result of an involuntary termination of employment (other than due to gross misconduct, for which COBRA is not available) or due to a reduction of hours.

ARPA provides that, by May 31, 2021, employers are required to distribute a notice regarding the COBRA premium subsidies to “assistance eligible individuals.” Given the May 31 deadline, employers were anxiously awaiting guidance from the IRS on many of the aspects of the COBRA premium subsidies. Pending issuance of guidance by the IRS under ARPA, many looked to the guidance that was issued to implement the 2009 American Recovery and Reinvestment Act (ARRA) COBRA subsidy for some indication of how the IRS might interpret ARPA’s provisions. Fortunately, much of the ARPA guidance—particularly relating to what constitutes an involuntary termination of employment—is consistent with that prior ARRA guidance.


Continue Reading IRS Issues Much Needed COBRA Guidance

On April 14th, 2021, the Department of Labor (“DOL“) issued cybersecurity guidance to plan sponsor and fiduciaries, recordkeepers and other service providers and participants and beneficiaries of plans regulated by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The guidance is presented in three separate parts: Tips for Hiring a Service Provider with Strong Cybersecurity Practices, Cybersecurity Program Best Practices and Online Security Tips for Participants and Beneficiaries.

Over the past ten years, cybersecurity has become an area of critical importance to plan sponsors, plan administrators and plan participants. With plans holding trillions in assets as well as sensitive participant information, retirement accounts have been attractive targets for cyber-enabled fraud. Plan participants are known to check their retirement account balances less frequently than personal banking, credit card or other financial accounts. As a result, there can be a delay before attacks on retirement accounts are discovered, making tracing and recovery efforts exceptionally difficult. Plans also permit electronic access to funds and rely upon outside service providers, which provide additional access points for breach. There is a growing body of litigation involving participants who have suffered retirement plan losses due to cyberattacks. Bartnett v. Abbott Laboratories, No. 20-cv-02127 (ND Ill., 2020) (motion to dismiss participant suit against plan sponsor and administrator granted, but denied with respect to third party record-keeper); Leventhal v. The MandMarblestone Group LLC, No. 18-cv-2727 (ED PA, 2019) (motion to dismiss suit by plan sponsor and participant against third party administrator denied); and Berman v. Estee Lauder, No. 4:19-cv-06489 (ND CA, 2019) (participant suit against plan sponsor, committee and third party record-keeper settled).


Continue Reading U.S. Department of Labor Weighs in on Cybersecurity for ERISA Plans

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA) which contains a variety of employee benefit provisions. ARPA contains both mandatory and discretionary provisions relating to benefits. The following summarizes the provisions of ARPA relating to COBRA premium subsidies (mandatory changes), changes to the cap on pre-tax dependent care assistance benefits (discretionary), changes to section 162(m) of the Internal Revenue Code relating to a corporation’s deduction for executive compensation in excess of certain limitations (mandatory but not effective until 2026), and updates to the employee retention credit (initially implemented as a part of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act).


Continue Reading ARPA to the Rescue: COBRA Subsidies, DCAP Relief and More!

Last year, the Department of Labor (working in concert with other agencies) issued two notices extending a variety of benefit plan deadlines as a result of the COVID-19 national emergency, as discussed in detail in our May 2020 blog. The relief generally provided that, in determining deadlines, the period from March 1, 2020 until 60 days after the end of the COVID-19 national emergency or such other date announced by the agencies (also known as the “Outbreak Period”) would be disregarded. However—and notably—the Outbreak Period was generally subject to the one-year duration limitation set forth in Section 518 of ERISA.

If the “one-year duration limitation” had in all cases begun on March 1, 2020, that one year would have already come and gone, even while the COVID-19 national emergency continues.  But the DOL has now, by way of EBSA Disaster Relief Notice 2021-01, issued further guidance that provides for an individualized application of the one-year duration limitation.


Continue Reading After One Year, the Outbreak Period is Ongoing – What’s a Plan Sponsor to Do?

The first 100 days of President Biden’s presidency are likely to bring a number of changes for employer-sponsored health and welfare plans. The more than three dozen Executive Orders that were issued by the end of January included orders providing a special Affordable Care Act enrollment period, directing the review of policies (and strengthening of protections) related to the Affordable Care Act and Medicaid, and expanding coverage for COVID-19 treatment (including through group health plans) and healthcare for women. As is typical for an incoming administration, President Biden also issued a regulatory freeze, potentially impacting several pending and recently finalized health and welfare-related regulations.

These 100 days may also bring guidance on the various health-related provisions that were a part of the Consolidated Appropriations Act, 2021 (the “Act”), which became law at the end of 2020. We have already discussed the changes for health and dependent care flexible spending accounts under the Act. However, the Act also contained a number of other provisions applicable to health and welfare plans, many of which are intended to increase transparency for plan participants and patients.
Continue Reading The First 100 Days: Changes Afoot for Health and Welfare Plans

After several delays, the Consolidated Appropriations Act, 2021 (the “Act”) was signed into law on December 27, 2020.  Although the Act primarily addresses coronavirus emergency response and relief and appropriations through September 30, 2021, it also contains several provisions of interest for employers that sponsor benefit plans, including temporary flexibility for health care and dependent care flexible spending accounts (FSAs), changes to retirement plan provisions, and certain health care plan changes related to so-called “surprise billing”.  The following summarizes the provisions of the Act that affect health care and dependent care FSAs.

Continue Reading New Year, Old FSA Money?

Pooled plan providers hoping to start operating pooled employer plans in 2021 will finally have the ability to register to do so, under regulations finalized by the Department of Labor (“DOL”) on November 16, 2020.

As described in detail in our prior alert, the SECURE Act created a new type of retirement vehicle called a “Pooled Employer Plan,” or PEP, in which multiple unrelated employers may participate and which may be sponsored by entities including financial services companies, such as banks, insurance companies and third-party administrators.  The sponsors, referred to as “Pooled Plan Providers” or PPPs, are responsible for most fiduciary and administrative duties related to the PEPs they sponsor.  The SECURE Act permits a PPP to begin sponsoring PEPs as soon as January 1, 2021, provided the PPP meets the SECURE Act’s requirements, including registration with the DOL and IRS before commencing operations.  The DOL issued proposed regulations on August 20, and in its November 16 final regulations, softened some of the requirements it had originally proposed.
Continue Reading Diving into the Pooled Plan Provider Deep End? It’s Time to Register!

Ed. Note: On September 22, 2020, the Fourth Circuit denied Gannett’s petition for rehearing en banc.  On October 8, 2020, the Fifth Circuit denied Schweitzer’s petition for rehearing en banc.  We expect the defendants (in Gannett) and the plaintiffs (in Schweitzer) will petition the Supreme Court for certiorari within the coming weeks, and will update this post as new developments arise in the case.

The Fourth Circuit’s recent split decision in Quatrone v. Gannett Co., Inc., No. 19-1212 (4th Cir. Aug. 11, 2020) is sure to raise the blood pressure of sponsors and administrators of retirement plans with single stock funds.  Together with a recent Fifth Circuit decision in Schweitzer v. Inv. Comm. of Phillips 66 Sav. Plan, No. 18-cv-20379, 2020 WL 2611542 (5th Cir. May 22, 2020), the Gannett case highlights the dilemma of retirement plan sponsors and fiduciaries, who, as a result of a corporate transaction, inherit a plan investment fund consisting of a single class of stock that does not constitute an employer security for purposes of ERISA (i.e., a “single stock fund”).  Plan fiduciaries in these circumstances have been targeted in class actions brought by an aggressive plaintiffs’ bar both for liquidating a single stock fund too soon and for not liquidating a single stock fund soon enough.  While courts are still evaluating how to handle these single stock fund cases, a plan fiduciary’s potential exposure for continuing to maintain such a fund seems to turn, at least in part, on the manner in which ERISA’s duties of prudence and diversification apply to the single stock fund as a plan investment option.


Continue Reading Appellate Court Split in Recent Single Stock Fund Litigation

The SECURE Act, enacted in December 2019, greatly enhances the ability of employers (particularly small and medium-sized employers) to maintain retirement programs for their employees. Specifically, it provides for the creation of a new retirement vehicle called a “Pooled Employer Plan.”  Unrelated employers may participate in a Pooled Employer Plan, which is sponsored by a

The Tenth Circuit’s recent split decision in M. v. Premera Blue Cross, No. 18-4098 (July 24, 2020), poses a significant threat to the deferential standard of review typically applied to benefit plan claim determinations, and imposes a new burden on plan administrators.

More than 30 years ago, the Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), that benefit denials are “reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Applying the Firestone doctrine, lower courts have consistently applied the substantially more deferential “arbitrary and capricious” or “abuse of discretion” standard of review to benefit denials when the plan at issue granted the plan administrator (or relevant fiduciary) discretionary authority consistent with the Firestone case.

The Tenth Circuit, in Premera, changes that standard.


Continue Reading Tenth Circuit Decision Puts New Emphasis on Including Discretionary Authority Language in Summary Plan Descriptions