In a 5-4 decision in Thole v. U.S. Bank N.A., the US Supreme Court has ruled that defined benefit plan participants lack Article III standing to sue for fiduciary breaches that do not harm the individual participants. As the Court noted, “[u]nder ordinary Article III standing analysis, the plaintiffs lack Article III standing for a simple, common-sense reason: They have received all of their vested pension benefits so far, and they are legally entitled to receive the same monthly payments for the rest of their lives. Winning or losing this suit would not change the plaintiffs’ monthly pension benefits.”
A CARES Act provision offers some relief to employee stock ownership plans by allowing the suspension of required minimum distributions for 2020.
In addition to providing individual stimulus payments and other individual-oriented assistance, the CARES Act contains some provisions aimed at retirement plans, some of which are of particular interest to companies that maintain employee stock ownership plans (ESOPs).
The Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on March 27 contains several emergency measures affecting retirement plans. The CARES Act gives plan sponsors the option of making available to participants, effective immediately, penalty-free coronavirus-related distributions as well as plan loans increased beyond the amount otherwise permitted under Internal Revenue Code (IRC) 72(p). Plan amendments for these provisions need not be adopted until the last day of the plan year beginning in 2022 (2024 for governmental plans). As plan sponsors eagerly put into place a portion or all of these relief measures, it is important to consider the special mid-year amendment rules that apply to safe harbor 401(k) plans.
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.
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.
The US Supreme Court recently decided a closely watched ERISA case against employers and fiduciaries. Under Section 413 of ERISA, the statute of limitations for a fiduciary breach claim is shortened from six years to three years if the plaintiff has “actual knowledge” of the breach.
On February 26, the Supreme Court determined in Intel Corp. Investment Policy Committee v. Sulyma that the six-year statute may apply—even if the fiduciary disclosed its actions to participants in accordance with ERISA—if the participants failed to read or could not remember reading the disclosures. In the Court’s unanimous view, “actual knowledge” means the participant must have become aware of the relevant information.
The SECURE Act—potentially the most impactful benefits legislation since the Pension Protection Act of 2006—was included in the bipartisan spending bill signed into law on December 20, 2019. The SECURE Act includes provisions that affect tax-qualified retirement plans and individual retirement accounts. Other provisions of the spending bill affect executive compensation and healthcare benefits.
We will continue to update you on the effects of the SECURE Act. Our current publications include the following:
- SECURE Retirement Legislation Becomes Law: Overview of Provisions Affecting Retirement Plans
- SECURE Act Increases Access to Retirement Plans with ’Pooled Employer Plans’
- The Good News and Really Bad News for IRA Owners Under the SECURE Act – Next Steps for IRA Providers
- SECURE Act Provides RMD Statement Relief for IRA Providers
Keep an eye out for upcoming LawFlashes on other key aspects of the SECURE Act and how the spending bill impacts employee benefits and tax-deferred savings.
On December 20, 2019, President Donald Trump signed into law the Further Consolidated Appropriations Act, 2020 (Act). After years of delayed effective dates, the Act finally repeals the 40% excise tax on high-cost health coverage, often referred to as the “Cadillac tax.” Furthermore, the Act extends the Patient-Centered Outcomes Research Institute (PCORI) fee scheduled to originally sunset at the end of 2019.
The Internal Revenue Service (IRS) has released IRS Notice 2019-63, which provides a 30-day automatic extension to furnish to employees/covered individuals the 2019 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage) from January 31, 2020 to March 2, 2020. This extension is similar to the extension issued in earlier years and does not impact the deadline to furnish transmittal Forms 1094-C and 1094-B and copies of the individual forms to the IRS. The deadline to file these forms remains February 28, 2020 (March 31, 2020, if filing electronically).
Morgan Lewis associate Samantha Kapnek co-authored this article.
On December 4, the Internal Revenue Service (IRS) issued Notice 2019-64, which contains the 2019 Required Amendments List for individually designed tax-qualified retirement plans. As background, the IRS issues its Required Amendments List each year to identify statutory and administrative changes to the tax qualification rules that may require sponsors of individually designed retirement plans to amend their plans to comply with the changes. In general, the deadline for adopting any required amendments on the list is the end of the second calendar year after the list is issued.
The 2019 list identifies the following changes that may require amendments to an individually designed retirement plan: