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
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.
Plan sponsors and fiduciaries may have spent 2020 scrambling to amend their plans and operating procedures to accommodate breaking COVID-19 guidance, but the Department of Labor’s (“DOL”) and federal courts’ wheels continued to turn, churning out decisions and guidance on a variety of ERISA issues—and plan sponsors and fiduciaries should take note. Included in recent DOL guidance are rules for reviewing and selecting retirement plan investments, voting proxies, and distributing retirement plan notices. Meanwhile, various federal appellate court decisions should lead fiduciaries to review summary plan descriptions (“SPDs”) and the inclusion of single-stock fund investment options in defined contribution plan lineups. The following checklist sets out 2020 developments for plan sponsors and fiduciaries to consider in the new year. Continue Reading 2021 Plan Sponsor/Fiduciary Compliance Checklist
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
This post has been updated as of March 25, 2021 to reflect changes made under the American Rescue Plan Act of 2021, as further described here.
The Internal Revenue Service (IRS) capped off a busy year with its annual cost-of-living adjustments applicable for 2021. A year-to-year comparison of limitations applicable to plan sponsors can be found here: 2021 Annual Limitations Chart.
Consistent with prior years, and reflecting general inflation, the IRS increased certain qualified retirement plan limitations. For example, the contribution limitation for defined contribution plans increased from $57,000 to $58,000 for 2021 (although the contribution limitation for defined benefit plans stayed stagnant). The annual compensation limit for purposes of Section 401(a)(17) of the Internal Revenue Code (IRC) increased from $285,000 to $290,000 (from $425,000 to $430,000 for certain governmental plans). The IRS did not, however, increase the amount of elective deferrals or catch-up contributions that can be made to defined contribution plans ($19,500 and $6,500, respectively).
On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act (the “Act”) which includes a $900 billion economic stimulus package intended to provide additional relief for the ongoing pandemic. As part of this stimulus package, the Act expands the employee retention tax credit that was originally included for 2020 in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into the first two quarters of 2021 with significant changes as described below that increase the credit and make the credit available to more employers, and the Act makes technical corrections to the credit provisions in the CARES Act as summarized below (our summary of the employee retention tax credit as included in the CARES Act can be found here). Continue Reading The Consolidated Appropriations Act Extends and Expands the Employee Retention Tax Credit
The longstanding view of the Department of Labor (the “DOL”) has been that proxy voting and other shareholder rights held by an ERISA plan are subject to ERISA’s fiduciary duties of prudence and loyalty. Previously, this view was expressed by the DOL in sub-regulatory guidance, such as interpretive and field assistance bulletins. In September of 2020, the DOL published a proposed rule (the “Proposal”) regarding an ERISA fiduciary’s duties with respect to shareholder rights. On December 16, 2020, the Department of Labor published the final regulation (the “Regulation”). Much like the Proposal, the Regulation requires that when a fiduciary decides whether and when to exercise plan shareholder rights, it must act prudently and solely in the interests of participants and beneficiaries and for the exclusive purpose of providing them benefits and defraying the reasonable expenses of administering the plan. However, in the Regulation, the DOL took an approach that is less prescriptive and more principles-based than the Proposal. Continue Reading Final ERISA Regulations Describe Fiduciary Duties Related to Plan Proxy Voting
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.
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!