On October 14, 2021, the U.S. Department of Labor (the “DOL”) published a proposed regulation entitled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” (the “Proposed Rule”).  The Proposed Rule is the latest in a series of DOL guidance and regulations regarding a plan fiduciary’s consideration of environmental, social and governance (“ESG”) factors when making investment decisions for ERISA plans and the exercise of shareholder rights by such plans. The Proposed Rule follows prior regulations issued by the DOL under President Trump in 2020 regarding both ESG (the “2020 ESG Rule”) and proxy voting (the “2020 Proxy Rule,” together with the 2020 ESG Rule, the “2020 Rules”). The 2020 Rules themselves followed a series of sub-regulatory guidance by the DOL, which issued guidance on these topics under each of the Clinton[1], Bush[2], Obama[3] and Trump[4] administrations. While the bedrock principals under the guidance largely remained unchanged, the gloss and tenor of the guidance has shifted, depending upon the political views of the White House’s then-current occupant.

ESG investing is increasingly popular and the importance that the Biden administration places on the topic is evident. In fact, on President Biden’s first day in office, he signed an executive order which Continue Reading DOL Shifts Toward Favorable View on ESG Investing and the Exercise of Shareholder Rights in New Regulation

On June 17, 2021, the Supreme Court in a 7-2 decision rejected a challenge to the individual mandate and the overall constitutionality of the Patient Protection and Affordable Care Act (the “ACA”) in the third major challenge to the law to reach the high court. The decision in California et. al. v. Texas et. al., 593 U. S. ___ (2021), was somewhat anticlimactic as the basis for the decision was that the plaintiffs did not have standing to bring the action. Accordingly, the Court did not address or provide guidance on the substantive constitutionality or severability issues raised in the lower courts. The decision does, however, signal that even a conservative Court is unlikely to overturn the ACA any time soon and so compliance with the various provisions of the ACA will be required. The decision has also been heralded as a victory for patients who are able to keep their health coverage as the country exits a year and half long pandemic. In addition, Democrats have expressed an intent to try to expand the ACA’s reach by adding provisions designed to make health care more affordable and accessible to the American people.

Continue Reading States Lack Standing – ACA Remains Standing

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

All too often, retirement plan administrators and benefits attorneys encounter situations with missing participants or uncashed checks that result in head scratching and exasperation.  It is difficult to believe that trying to deliver money to someone could produce such frustration, but it happens more than one would think.  In an attempt to alleviate some of these woes and help ensure that participants and their beneficiaries receive the retirement benefits due to them, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) came out with three related pieces of guidance on January 12, 2021: (1) a set of Best Practices for Pension Plans (the “Best Practices”), describing steps that plan fiduciaries can take to reduce missing participant issues; (2) Compliance Assistance Release No. 2021-01, outlining the investigative approach that guides the DOL’s regional offices under its Terminated Vested Participants Project; and (3) Field Assistance Bulletin 2021-01, authorizing fiduciaries of terminating defined contribution plans to transfer missing participants’ account balances to the Pension Benefit Guaranty Corporation’s (PBGC) Missing Participants Program as a matter of temporary enforcement policy.  This blog post highlights key points from the Best Practices and focuses on practical tips plan fiduciaries can take away from the DOL guidance.

Continue Reading Key Takeaways From The DOL’s “Best Practices” Missing Participant Guidance

This is the second of two installments on the American Rescue Plan Act of 2021 (ARPA). Mayer Brown’s first installment describes provisions of ARPA relating to COBRA premium subsidies, changes to the cap on pre-tax dependent care assistance benefits, changes to section 162(m) of the Internal Revenue Code relating to a corporation’s deduction for executive compensation, 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).

This installment focuses on the provisions of ARPA that provide relief to multiemployer and single employer defined benefit plans.

Continue Reading Multiemployer and Single Employer Plan Provisions of the American Rescue Plan Act: Help is on the way!

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!

On March 10, 2021 the U.S. Department of Labor (“DOL”) released a policy statement that it will not enforce or otherwise pursue enforcement actions against a fiduciary for failing to comply with the “Financial Factors in Selecting Plan Investments” regulation published on November 13, 2020 (the “ESG Rule”) and the “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” regulation, published on December 16, 2020 (the “Proxy Voting Rule”). Both regulations were promulgated by the DOL shortly before the Biden administration took office. In the recent policy statement, the DOL stated that certain stakeholders, including asset managers, plan sponsors and consumer groups have expressed concern over whether these rules accurately reflect a fiduciary’s duties under ERISA and appropriately consider the utility of environmental, social and governance (“ESG”) factors in making investment decisions. As a result, the DOL intends to “revisit” each of these rules. Continue Reading DOL Announces Non-Enforcement Policy of Recent ESG and Proxy Voting Rules

Gavel

On January 21, 2021, the United States District Court for the Northern District of California granted a motion by the Intel Corporation Investment Policy Committee to dismiss all ERISA claims brought against it by two plan participants representing a class of participants. The plaintiffs alleged, among other things, that the Committee acted imprudently by including private equity, hedge funds and commodities in a custom target date investment option in Intel’s 401(k) plan. The case was Anderson v. Intel Corp. Inv. Policy Comm., Case No. 19-CV-04618-LHK. Continue Reading Court Rejects Plaintiffs’ Claims that Private Equity is Imprudent for 401(k) Plan

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?