EBSA Issues COVID-19-Related Relief for Retirement Plans

The DOL’s Employee Benefits Security Administration (EBSA) has issued guidance extending retirement-plan-related deadlines in response to the COVID-19 emergency. The guidance—issued pursuant to the DOL’s recently expanded authority under ERISA § 518 (see our Checkpoint article)—consists of a joint rule issued in conjunction with the IRS (implementing its comparable authority under Code § 7508A) and a formal notice. Under the joint rule, plans must disregard the “outbreak period” from March 1, 2020, until 60 days after the announced end of the COVID-19 emergency or such other date as may be announced in a future notice when determining specified periods or dates. Under the notice, plans and responsible plan fiduciaries will not be treated as having violated ERISA if they act in good faith and furnish notices, disclosures, or documents that would otherwise have to be furnished during the outbreak period (including those requested in writing by a participant or beneficiary) “as soon as administratively practicable under the circumstances.” The notice’s relief only applies to notices, disclosures, and documents required by ERISA Title I that are under the DOL’s jurisdiction and not addressed by the joint rule. Good faith includes using electronic methods to communicate with individuals who are reasonably believed to have effective access to those methods. The relief applies broadly, regardless of location. Here are highlights for 401(k) plans:

• Plan Loans and Distributions. The notice extends relief to certain procedural verification requirements for plan loans or distributions imposed by a plan’s terms if (1) the failure to comply with the plan’s procedures is solely attributable to the COVID-19 outbreak, (2) the plan administrator has made a good faith effort to comply, and (3) the plan administrator makes a reasonable attempt to correct procedural deficiencies (e.g., missing documentation) as soon as administratively practicable. The relief does not apply to items outside the DOL’s jurisdiction, such as the spousal consent rules and other rules under IRS jurisdiction. Furthermore, the DOL will not assert a violation of the adequate security and reasonably equivalent basis requirements for plan loans made or repaid in compliance with the CARES Act and any related IRS guidance. Similarly, the DOL will not treat a plan as failing to operate in accordance with its plan document if plan amendments that comply with the CARES Act’s requirements are timely adopted by the statutory deadline or a later IRS-prescribed date.
• Contributions and Loan Repayments. During the outbreak period, the DOL will not take enforcement action on a temporary delay in the forwarding of participant contributions or loan repayments to a plan if the delay is attributable solely to the COVID-19 outbreak. Employers and service providers must, however, comply as soon as administratively practicable under the circumstances.
• Benefit Claims. The joint rule’s extensions of the deadlines for filing benefit claims and appeals of adverse benefit determinations apply to all ERISA plans, including retirement plans. An example in the notice clarifies application of the extension assuming the COVID-19 emergency ends on April 30, 2020, with the outbreak period ending on June 29, 2020 (60 days later). Using those assumptions, an employee who received a notice of adverse determination on a claim for pension benefits, and who was given 60 days to file an appeal, would have 60 days after the end of the outbreak period, or until August 28, 2020, to file the appeal.
• Blackout Notices. The extended relief for ERISA notices applies to the blackout notice requirement, including notices required after a blackout period begins. Plan administrators will not be required to provide a written determination that the COVID-19 pandemic was a circumstance beyond their control.
• Fiduciary Compliance. The notice encourages fiduciaries to make reasonable accommodations to prevent benefit losses or payment delays, and to minimize lost benefits due to failures to comply with “pre-established timeframes.” The notice also explains that the DOL’s approach to enforcement will be to emphasize compliance assistance, using grace periods and other relief as appropriate.
• Form 5500. The notice confirms that Form 5500 filing relief is provided in accordance with IRS guidance, which provides that filings otherwise due on or after April 1 and before July 15, 2020, are now due July 15, 2020 (see our Checkpoint article).
• FAQs for Participants and Beneficiaries. EBSA has also issued FAQs addressing retirement benefit questions arising during the COVID-19 pandemic. The FAQs offer general guidance—much of it not unique to the COVID-19 emergency—regarding topics such as how to file benefit claims, make investment changes, inquire about late payments or statements, or request distributions. The FAQs reference the CARES Act changes that liberalized the plan distribution and loan rules during the pandemic (see our Checkpoint article), but they also emphasize the potential tax and other adverse consequences of taking distributions (including the possibility that under some state laws, retirement plan distributions may be viewed as income that affects the ability to receive unemployment compensation).

EBIA Comment: The DOL has wasted little time in applying its new authority under ERISA § 518 to the COVID-19 emergency. 401(k) plan sponsors and advisors will want to focus particular attention on the notice and the extent to which its relief requires that compliance failures be attributable “solely” to the COVID-19 pandemic. Where potential violations could be seen as having multiple causes, it may be important to be able to demonstrate how the pandemic controlled plan operations. Employers and advisors working with group health plans and other welfare benefits will be interested in other aspects of the final rule, notice, and FAQs, which are covered in our separate Checkpoint article. For more information, see EBIA’s 401(k) Plans manual at Sections XIII (“Distributions: Consent and Form Requirements”), XVI (“Distributions: Participant Loans”), XXVI.K (“Blackout Notice Requirements”), XXX (“Plan Administration: ERISA Claims Procedures”), and XXXI (“Plan Administration: Annual Form 5500 Reports and SARs”).

Contributing Editors: EBIA Staff.