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The $100,000 limit on coronavirus‑related distributions (CVRD) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is both an individual limit and a plan limit. Tracking and enforcing the $100,000 limit has the potential to create special compliance issues for employers and controlled group affiliates that sponsor more than one retirement plan and have individuals with an account balance under more than one of those plans.

Under the CARES Act, an eligible individual—that is, an individual who satisfies the requirements to be eligible to take a CVRD (discussed in in more detail in our prior blog post)—may take CVRDs during calendar year 2020 of up to $100,000. This individual limit applies in the aggregate to all CVRDs from the individual’s IRAs and employer‑sponsored retirement plans.

Due to the economic and financial upheaval caused by the coronavirus (COVID-19) pandemic, many employees are asking their employers if they are able to cancel their deferral elections and/or receive accelerated payments from their nonqualified deferred compensation plan accounts to help offset financial difficulties they may be facing.

Generally, Internal Revenue Code Section 409A and the regulations promulgated thereunder do not allow for the alteration or cancellation of deferral elections or the acceleration of payments under plans subject to Section 409A. However, Section 409A does allow for the cancellation of a deferral election and/or acceleration of payments if an employee experiences an “unforeseeable emergency” within the meaning of Section 409A.

The Coronavirus Air, Relief, and Economic Security (CARES) Act signed into law on March 27 includes an allocation of $200 million to the Federal Communications Commission (FCC) to support telehealth services and $125 million to the US Department of Agriculture’s Rural Utilities Service to expand its existing distance learning, telehealth, and broadband initiative.

Read our LawFlash that includes a summary of these provisions.

The IRS has extended the last day of the Initial Remedial Amendment Period for Section 403(b) plans from March 31, 2020 to June 30, 2020. As described in our earlier LawFlash, the Initial Remedial Amendment Period permits employers to correct form defects in their plan documents retroactive to as far back as January 1, 2010. The IRS determined that under the current circumstances, it was appropriate to extend the deadline given the current strains on tax-exempt employers.

As the effects of the coronavirus (COVID-19) pandemic hit the United States, downsizings and shutdowns are spreading indiscriminately throughout the economy. Employers who are complying with “shelter in place” regulations and attempting to mitigate these extraordinary economic challenges with layoffs should keep in mind that such unprecedented actions may still involve complying with routine regulatory obligations.

UPDATED March 24, 2020

The following states have been declared major disaster areas and, where indicated, are eligible for the Federal Emergency Management Agency’s (FEMA’s) Crisis Counseling Program, which FEMA identifies as a form of individual assistance:

Major Disaster Area

Date Declared

Incident Period

Crisis Counseling Program or other Individual Assistance

New York State

March 20, 2020

January 20, 2020, and continuing

Yes

California

March 22, 2020

January 20, 2020, and continuing

Yes

Washington State

March 22, 2020

January 20, 2020, and continuing

Yes

Iowa

March 23, 2020

March 21, 2020, and continuing

No/Unclear*

Louisiana

March 24, 2020

January 20, 2020, and continuing

Yes


* Unlike the announcements regarding the other states identified in this chart, FEMA's announcement of Iowa as a major disaster area did not include any reference to the Crisis Counseling Program or other individual assistance being available at this time. However, this does not preclude FEMA from identifying individual assistance that is available in Iowa at a later date.

Recognizing that our employee benefits clients often need an extra pair of hands-either because of a benefits staff shortage, a labor-intensive project, or for other reasons–we are pleased to announce our ML BeneHelp program. Through ML BeneHelp, our senior benefits advisors are available for in-person or virtual temporary assignment to assist during crunch time. Please see our announcement to learn more about this program.

Single employer defined benefit plans are required to comply with limitations on accelerated benefits payments, future benefit accruals, and implementation of benefit increases triggered by plan underfunding or plan sponsor bankruptcy. Given the recent market and business disruptions, the following high-level review of these rules may be helpful, especially for plan sponsors of plans that use a non-calendar plan year.

Employers with self-insured health plans may be thinking about making coronavirus (COVID-19)-related changes, such as waiving the patient responsibility portion of the charge for a hospital stay that is related to COVID-19. If there is stop loss insurance, it is important to consider the implications of a plan design change. Many stop loss policies require that the insurer sign off on any design changes to the plan, or exclude payment for treatments or plan costs that are outside of the specifications provided in the policy application. The takeaway is that if you are thinking of making design changes to your self-insured health plan and there is stop loss insurance, it may be important to get advance sign-off from the stop loss insurer, or at least obtain an understanding of the implications if the insurer declines to sign off.

Our employee benefits and executive compensation practice is available to help employers evaluate and troubleshoot potential issues arising from the changing work environment and economic situation caused by the COVID-19 pandemic. This guidance reviews the employee benefits and executive compensation issues that we have been assisting clients with in the last few days.

Please contact the authors or your Morgan Lewis contacts if you have questions related to employee benefits and executive compensation in the midst of coronavirus COVID-19. For updated, comprehensive information about COVID-19, please see our resource page.