For those of us that work in the area of employee benefits, life is never dull even in “quiet” times. We spend our days figuring out how to comply with new laws passed by Congress, dealing with the seemingly unending stream of both formal and informal guidance from the Internal Revenue Service (IRS), the United States Department of Labor (DOL) and other governmental agencies and making adjustments on the fly for the changes in those rules made by decisions of the courts interpreting the statutes and the guidance on both a national and statewide basis. We also have to confront the practical realities of running our benefit plans in accordance with the terms of (hopefully) written plan documents and the requirements of the law while applying those rules to the unique circumstances of our employees and other plan participants and beneficiaries.
2020 has certainly been a challenge as we also had to simultaneously deal with implementing Covid-19 restrictions and workplace shut-downs with guidance that seemed to change minute-by-minute and that was often released late at night (remember waiting until the wee hours of the morning for the New York Economic Development Corporation to issue the “essential business” guidance?) or in 100+ pages of regulations. We also had to implement the pivot to a more virtual workforce and confront the cybersecurity and the other employee issues that working from home brings. Once we got everyone settled in and working from home we had to start planning for how (and when) to bring employees back. Re-opening guidance from the government was often frustratingly vague and issued (and revised) in drips and drabs at all hours of the day and night, even on weekends.
We also implemented the laws and guidance that the government issued to combat the virus and support the economy (the various paid and other leaves under the Families First Coronavirus Response Act (FFCRA), the Paycheck Protection Program (PPP) and the various employee benefits changes made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act). While most of these laws have a short shelf life and are expected to expire at the end of 2020, the current resurgence of the virus in both New York and the nation as a whole may mean that we have to deal with them for the indefinite future.
While we received extensions for some compliance deadlines (more on this below) and for some tax and related filings, other deadlines remained in effect. Our annual Form 5500s still needed to be filed and in the midst of our return to work planning we still had to manage the usual plan audit (for those plans that require an audit before a 5500 can be filed). As we go to publication, most of us are in the midst of (or gearing up for) annual open enrollment for the 2021 plan year. For those of you that sponsor group health plans, remember that the annual “Notice of Creditable Coverage Under Medicare Part D” must go out by October 15, 2020. If your insurance carrier or your third party plan administrator usually sends these notices, be sure that that are on track to do so.
Many employers are asking “what am I required to do this year? I don’t have time for a 10-page listing of all the things that may be considered.”. The remainder of this article will briefly summarize those actions that must be taken by most employers by the end of the year.
A. Retirement Plans
The CARES Act made two mandatory changes to qualified retirement plan rules. First, the 2020 Required Minimum Distributions from qualified retirement plans and individual retirement accounts (IRAs) are waived. The second is that plan loan payment and payoff dates are automatically delayed for a one-year period for eligible loans. Eligible loans include loans to people who have suffered financially due to layoffs, furloughs, reduced work hours, closing of businesses, etc.
What you have to do to implement these changes will vary from plan to plan. For those of you that have a third party administrator (TPA) or that use a prototype plan provided by your service provider that requires you to “check the boxes” and otherwise fill in your plan details in an adoption agreement, check with your TPA and/or service provider as they may have already made the necessary changes. Plan sponsors that have a written loan policy apart from their plan document may need to amend that policy to reflect the delay as soon as possible, and certainly by the end of the year.
For those of you that use an individually-designed plan, you may need to amend your plan and/or your loan policy to make these changes. This amendment to your loan policy must be done as soon as possible, and certainly by the end of the year. You may or may not need to amend your plan by the end of the year.
For defined benefit plans, the due date for your required 2020 contributions has been extended to 2021. Whether you must take any action this year will vary from plan to plan.
The CARES Act also made a couple of optional changes: a temporary increase in the amounts available for loans from defined contribution plans to the lesser of $100,000 or 100% of a participant’s account balance and a temporary opportunity for a penalty-free distribution if a participant can meet certain Covid-related requirements.
It appears that very few of our clients opted to take advantage of these optional changes so that no further action is required this year, especially if you have an individually-designed plan. For those with a TPA or prototype plan, check with your TPA or service provider to confirm whether you have next steps for this year. Some TPAs and service providers elected to allow these optional provisions for their entire book of business or for those that did not affirmatively opt out of these provisions.
B. Health and Welfare Benefit Plans
The CARES Act also made certain mandatory changes to group health plans: coverage for Covid testing and vaccines, the opening of a temporary safe harbor for telehealth and other remote care services and the repeal of the limitations on the reimbursement of over-the-counter (OTC) drugs by account-based plans (flexible spending accounts (FSA), health savings accounts (HSA) and health reimbursement accounts (HRAs). Check with your insurer or third-party administrator to be sure that these changes have been made and confirm that you are not required to take any further action this year. If you administer your group health plans in-house, you should be sure that these changes have been made; you may be required to revise policies or amend your plan document by the end of the year.
Another set of mandatory changes extends the deadlines for special enrollment under the Health Insurance Portability and Accountability Act (HIPAA), various deadlines for group health plan continuation coverage under the Consolidated Budget Reconciliation Act of 1985 (COBRA), the deadlines for individuals to file claims or appeal an adverse benefit determination and the deadlines for seeking external review of an adverse benefit determination or for filing information to perfect a request for external review if a prior request was found to be incomplete. All of these deadlines are extended for the length of a period called the “Outbreak Period”. The “Outbreak Period” begins March 1, 2020 and will end 60 days after the federally-declared Covid-19 emergency period ends. There is no date in sight yet for the end of the federal Covid-19 emergency declaration.
C. Cafeteria Plans, FSAs, HRAs and HSAs:
IRS Notice 2020-29 allows (but does not require) cafeteria plans to the following mid-year changes in addition to the usual mid-year election changes: mid-year opt-in to group health plan coverage, change of group health plan coverage options, and the ability to revoke health plan coverage (if certain requirements are met).
Health FSA and Dependent Care FSA plans may also allow participants to prospectively revoke an election, make a new election, increase an election or decrease an election. If these plans currently have the 2 ½ month grace period feature, they may allow unused amounts remaining as of March 15, 2020 to reimburse eligible expenses incurred though December 31, 2020.
If you opted not to allow these additional changes, no further action is required on your part, especially if you administer these plans in-house. For those that use a TPA or prototype plan, check with your TPA or service provider to confirm whether you have next steps for this year. As was the case with the optional retirement plan changes, some TPAs and service providers elected to allow these optional provisions for their entire book of business or for those that did not affirmatively opt out of these provisions, so check with them as to your next steps.
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Thomas A. Conlon |
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