In response to the coronavirus (COVID-19) pandemic, the US Department of Labor’s Employee Benefits Security Administration (DOL) issued EBSA Disaster Relief Notice 2020-01 (EBSA Notice 2020-01) on April 28, providing deadline relief and other guidance for employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
The DOL also issued an accompanying set of FAQs on health benefits and retirement benefit issues to help employee benefit plan participants and beneficiaries, plan sponsors, and employers impacted by the pandemic understand their rights and responsibilities under ERISA.
The deadline relief and guidance applies retroactively from March 1, 2020, the beginning of the COVID-19 national emergency declared by President Donald Trump, until 60 days after the announcement of the end of the national emergency or such other date as the DOL determines. However, if under the relief and guidance a period is to be disregarded in determining a deadline, such disregarded period can be no longer than one year by statute.
Below is a summary of the significant topics addressed by EBSA Notice 2020-01 and the accompanying FAQs as they relate to retirement plans:
- Deadline Extension for Disclosures and Documents Required by Title I of ERISA. The new guidance provides for an extension of deadlines for furnishing required notices or disclosures to plan participants, beneficiaries, and other persons so that plan fiduciaries and plan sponsors have additional time to meet their obligations under Title I of ERISA. This extension only applies to documents required by provisions of Title I of ERISA over which the DOL has interpretative and regulatory authority, except for notices and disclosures addressed in the “joint notice” with the Treasury Department and Internal Revenue Service. Thus, notices under parallel provisions of ERISA and the Internal Revenue Code of 1986, as amended, for which authority was transferred to the Secretary of the Treasury under the Reorganization Plan No. 4 of 1978 – such as spousal consent notices and benefit reduction (ERISA Section 204(h)) notices – do not come within the scope of the extension.
Common notices and disclosures required by Title I of ERISA and that come within the scope of the relief provided by EBSA Notice 2020-01 include:
- Summary Plan Descriptions (SPDs)
- Summaries of Material Modifications (SMMs)
- Summary Annual Reports (SARs)
- QDRO notices
- Periodic pension benefit statements
- Qualified Default Investment Alternative (QDIA) Notices
- Mapping Notices
- Notices of Adverse Benefit Determinations and Appeals
- Notification of Benefit Determination (Claims Notices or “Explanation of Benefits”)
- Blackout Notices. With respect to blackout notices, the DOL provided specific guidance described below
- Annual Funding Notices
An employee benefit plan and the responsible fiduciary will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency, if the plan and responsible fiduciary “act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.” Good faith acts include the use of electronic communications with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication, including “email, text messages, and continuous access websites.” Significantly, Notice 2020-01 (and the FAQs) do not cross-reference the DOL’s existing and narrow safe harbor rules regarding the use of electronic media for issuing participant communications (which would not, for example, allow for the use of text messages), which might indicate that the DOL’s new safe harbor electronic disclosure rules that were proposed last October and discussed in our blog post are forthcoming.
- Noncompliance Relief for Verification Requirements for Plan Loans and Distribution. Noncompliance with the verification procedures related to plan loans and distributions under the terms of the plan will not be treated as failures by the DOL so long as (i) the procedural deficiency is solely attributable to the COVID-19 pandemic, and (ii) the plan administrator makes a good faith effort under the circumstances to comply with those requirements and makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable. The DOL notes that this relief does not include spousal consent or other statutory or regulatory requirements under the jurisdiction of the Treasury/IRS.
- Prohibited Transaction Relief for CARES Act Loans. As described in a recent LawFlash, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) temporarily liberalizes plan loan and distribution rules and extends loan repayment deadlines. The new guidance issued by the DOL synchronizes with the liberalized loan limitation relief under the CARES Act and provides that the DOL will not treat any person as having violated the provisions of Title I of ERISA, including the adequate security and reasonably equivalent basis requirements in Section 408(b)(1) of ERISA, solely because (1) the person made a plan loan in compliance with the CARES Act and any provisions of any related IRS notice or other published guidance, or (2) a qualified individual delayed making a plan loan repayment in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance. In addition, if a plan is amended to provide the relief for plan loans and distributions described in the CARES Act, the DOL will treat the plan as being operated in accordance with the terms of such amendment prior to its adoption if the amendment is made on or before the last day of the first plan year beginning on or after January 1, 2022 or such later date (if applicable) prescribed by the Secretary of the Treasury and the amendment meets the conditions of Section 2202(c)(2)(B) of the CARES Act.
- DOL Enforcement Moratorium for Delayed Participant Contributions or Loan Repayments. The DOL will not take enforcement action with respect to a temporary delay in forwarding participant contributions or loan repayments to a plan if such failures are attributable solely to the COVID-19 pandemic, provided that employers and service providers act reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances. This enforcement relief covers participant contributions (such as 401(k) deferrals) and loan repayments by payroll deduction that would otherwise be subject to transfer to the related trust during the period beginning March 1, 2020, and ending on the 60th day following the announced end of the national emergency, as described above. Employers should be cautious in applying this relief, in light of the DOL’s (i) generally stringent enforcement of plan asset-related issues, and (ii) its explicit qualification in Notice 2020-01 that the delay must be “solely” on the basis of a failure “attributable” to COVID-19.
- Blackout Notice Relief for Blackouts Caused by Pandemics. Under existing regulations, the administrator of an individual account plan is required to provide 30 days’ advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by a blackout period. However, the regulations provide an exception to the advance notice requirement when the inability to provide the notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing. The new guidance explicitly states that the deadline relief described in the first bullet above applies to required blackout notices. Further, the DOL will not require written determination by a fiduciary for blackout notices, “as pandemics are by definition beyond a plan administrator’s control.”
- Delayed Form M-1 Filing Deadline. The M-1 filing deadline is pushed back to July 15 in accordance with prior Form 5500 relief issued by the IRS and the PBGC. The DOL and the prior Form 5500 relief have thus far failed to extend the due date for the 2019 Form 5500 filings for calendar year plans. Under the prior Form 5500 filing relief, the due date to file a Form 5500 that is otherwise due between April 1, 2020 and July 14, 2020, has been extended to July 15, 2020; however, since the 2019 Form 5500 filing deadline for a calendar plan falls on July 31, 2020, the due date for calendar year plans has not been extended at this point.
- DOL Enforcement Will Emphasize Compliance Assistance, Grace Periods, and Other Relief. The new guidance provides that the DOL’s approach to enforcement will emphasize compliance assistance and include grace periods and other relief where appropriate, including when physical disruption to a plan or service provider’s place of business makes compliance with pre-established timeframes for certain claims’ decisions or disclosures impossible.
In addition to EBSA Notice 2020-01 and the accompanying FAQs, the DOL and Treasury published a joint notice to address coverage issues under COBRA and to announce an extension for certain deadlines related to health and retirement plans, including additional time to file claims, resulting from the COVID-19 outbreak, which will be the subject of a forthcoming blog post. Critically, with respect to retirement plans, the joint notice provides that employee pension plans subject to ERSIA must disregard the period from March 1, 2020, until 60 days after the announced end of the declared COVID-19 national emergency in determining the date within which individuals may file a benefit claim under the plan’s claims procedure and the date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure. Presumably, this also applies with respect to plan-imposed statute of limitation deadlines for commencing or exhausting the claims and appeals procedure before filing suit in federal court. The maximum period that may be disregarded pursuant to the joint notice in determining the claims and appeals deadlines is one year by statute.
The broad relief provided by EBSA Notice 2020-01 is a welcome development for retirement plan fiduciaries that have struggled to satisfy their disclosure or notice obligations during the COVID-19 crisis. However, personnel must keep in mind that the DOL’s relief does not extend the compliance deadlines indefinitely. Rather, the DOL generally expects plan fiduciaries to make good faith efforts to comply with their legal requirements as soon as administratively practicable under the circumstances. As these circumstances are likely to be second-guessed in the years following the end of the current crisis, plan administrators might consider documenting the reasons for any delays, the good faith efforts that are undertaken to comply, and the circumstances giving rise to the compliance occurring as soon as administratively practicable.
Coronavirus COVID-19 Task Force
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Randall C. McGeorge
R. Randall Tracht