Presence Not Required – IRS Extends Remote Signature Procedures for Qualified Plans

The IRS has extended temporary relief allowing plan representatives to witness participant elections or spousal waivers via videoconference until June 30, 2021. 

The IRS initially provided relief from the physical presence requirement from January 1, 2020 through December 31, 2020 in IRS Notice 2020-42 in response to the COVID-19 related social distancing restrictions. On December 22, 2020, the IRS extended that relief through June 30, 2020 through IRS Notice 2021-03.

The relief provides that participant elections required to be witnessed by a plan representative or notary public, including spousal consent, may be satisfied using alternative procedures that do not require physical presence. For a participant election witnessed by a notary public, the physical presence requirement is deemed satisfied with remote notarization using live audio-video technology that satisfies certain requirements. For a participant or spousal election witnessed by a plan representative, the physical presence requirement is deemed satisfied if an audio-video system is used that satisfies the following requirements:

  1. The individual signing the election presents a valid photo ID to the plan representative during the videoconference (transmitting the ID before or after the videoconference is not good enough);
  2. The video conference is live and allows direct interaction between the participant and plan representative;
  3. The individual faxes or electronically transmits a legible copy of the signed document to the plan representative on the same day it is signed; and
  4. After receiving the signed document, the plan representative acknowledges that the signature has been witnessed by the plan representative and transmits the signed document, including the acknowledgement, back to the individual using an electronic medium the individual can easily access.

Notice 2021-03

Webinar: The Must-Do’s and Common Mistakes of Employee Benefit Planning

Lisa Dursey joins Stephanie Rising of The Rising Effect in a 15-minute webinar discussing the must-do’s and common mistakes of administering employee benefit plans. This webinar provides a concise primer on how to structure and correctly administer your plans.

Stephanie starts the webinar by explaining the importance of your new-hire process, and then dives more deeply into traditional and lifestyle benefits that attract and retain talented employees. Lisa then outlines the common mistakes that are made in administering those benefits, and how to correct them.

Contact ERISA Benefits Law to discuss your benefit plan administration or for help resolving any plan errors. Please note that in addition to general benefits advice, ERISA Benefits Law attorneys are well versed in designing sick leave policies for COVID-19.

ERISA Benefits Law Receives Recognition as a Top Tier Law firm in 2021 U.S. News – Best Lawyers® “Best Law Firms” Rankings

We are happy to announce that ERISA Benefits Law has again been recognized as a top tier law firm in the 2021 US News Best Lawyers® “Best Law Firms” rankings. The firm received a Tier 1 rankings in Employee Benefits (ERISA) Law and in Employment Law – Management. We are grateful for the recognition of our peers and the trust of our clients as a niche ERISA and employee benefits law firm focused on providing the highest quality legal services at the most affordable rates anywhere.

The U.S. News – Best Lawyers “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.

IRS Announces COLA Adjusted Retirement Plan Limitations for 2021

The Internal Revenue Service today released Notice 2020-79 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2021.

Highlights Affecting Plan Sponsors of Qualified Plans for 2021

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $19,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,500.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $13,500.
  • The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $230,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased for 2021 from $57,000 to $58,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $285,000 to $290,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan remains unchanged at $185,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,150,000 to $1,165,000, while the dollar amount used to determine the lengthening of the five year distribution period remains unchanged at $230,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $130,000.

The IRS previously updated Health Savings Account limits for 2021. See our post here.

The following chart summarizes various significant benefit Plan limits for 2019 through 2021:

Type of Limitation202120202019
415 Defined Benefit Plans$230,000$230,000$225,000
415 Defined Contribution Plans$58,000$57,000$56,000
Defined Contribution Elective Deferrals$19,500$19,500$19,000
Defined Contribution Catch-Up Deferrals$6,500$6,500$6,000
SIMPLE Employee Deferrals$13,500$13,500$13,000
SIMPLE Catch-Up Deferrals$3,000$3,000$3,000
Annual Compensation Limit$290,000$285,000$280,000
SEP Minimum Compensation$650$600$600
SEP Annual Compensation Limit$290,000$285,000$280,000
Highly Compensated$130,000$130,000$125,000
Key Employee (Officer)$185,000$185,000$180,000
Income Subject To Social Security Tax  (FICA)$142,800$137,700$132,900
Social Security (FICA) Tax For ER & EE (each pays)6.20%6.20%6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)1.45%1.45%1.45%
SECA (FICA Portion) for Self-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.90%2.90%2.90%
IRA Contribution$6,000$6,000$6,000
IRA Catch-Up Contribution$1,000$1,000$1,000
HSA Max. Contributions Single/Family Coverage$3,600/
$7,200
$3,550/ $7,100$3,500/ $7,00
HSA Catchup Contributions$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,400/ $2,800$1,400/ $2,800$1,350/ $2,700
HSA Max. Out Of Pocket Single/Family$7,000/
$14,000
$6,900/ $13,800$6,750/ $13,500

ERISA Benefits Law Attorney Erwin Kratz Named to the Best Lawyers in America© 2021

ERISA Benefits Law attorney Erwin Kratz was recently selected by his peers for inclusion in The Best Lawyers in America© 2021 in the practice area of Employee Benefits (ERISA) Law. Mr. Kratz has been continuously listed on The Best Lawyers in America list since 2010.

Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. Lawyers are not required or allowed to pay a fee to be listed; therefore inclusion in Best Lawyers is considered a singular honor. Corporate Counsel magazine has called Best Lawyers “the most respected referral list of attorneys in practice.”

New Lifetime Income Disclosure Requirement for Pension Benefit Statements

The DOL issued an interim final rule on August 18, 2020 that gives plan administrators the opportunity to limit their liability with respect to the lifetime income illustrations that will be required soon for pension benefit statements for defined contribution plans. The rule provides a set of assumptions to use in preparing the lifetime income illustrations, as well as model language that may be used for benefit statements.

Background

The SECURE Act amended the pension benefit statement requirements under section 105 of the Employee Retirement Income Security Act of 1974 (ERISA) to require that a participant’s accrued benefits be included on his or her pension benefit statement as both (1) a current account balance and (2) an estimated lifetime stream of payments. The SECURE Act required that the estimated lifetime stream of payments be shown as both a single life annuity (SLA) and a qualified joint and survivor annuity (QJSA), at least annually.

Actuarial Assumptions & Model Language

The interim final rule prescribes the following assumptions for calculating the lifetime stream of payments:

+ Assumed Commencement Date: Plan administrators must calculate monthly payment illustrations as if the payments begin on the last day of the benefit statement period.

+ Assumed Age: Plan administrators must assume that, on the assumed commencement, a participant is the older of age 67 or the participant’s actual age.

+ QJSA Assumptions: Plan administrators must assume that all participants have a spouse of equal age. Plan administrators must also use a  Qualified Joint and 100% Survivor Annuity.

+ Assumed Interest Rate: Plan administrators must use the 10-year constant maturity Treasury rate (10-year CMT) as of the first business day of the last month of the statement period to calculate the monthly payments.

The interim final rule requires that plan administrators provide various explanations about the estimated lifetime income payments to participants. The rule provides model language that may be used for each of the required explanations, and the model language may be integrated into a plan’s pension benefit statements or attached to the statements as an addendum. See pages 93 through 98 of the IFR for the model language.

Limitation on Liability

In accordance with the SECURE Act, the interim final rule provides that no plan fiduciary, plan sponsor, or other person will be liable under ERISA for providing a lifetime income illustration that (1) uses the published assumptions to calculate the lifetime income equivalents, and (2) uses the DOL’s model language, or language substantially similar to the model language, in participants’ benefit statements. This relief from liability addresses the concern of many plan fiduciaries that participants might sue them if actual monthly payments in retirement fall short of illustrations provided prior to retirement.

Effective Date & Comment Period

The interim final rule will be effective 12 months after the date of its publication in the Federal Register. The interim final rule includes a 60-day comment period.

For more information, please see the Interim Final Rule, the DOL Fact Sheet, and the DOL News Release.

Attorney Lisa Dursey Joins ERISA Benefits Law

ERISA Benefits Law, PLLC is pleased to welcome ERISA attorney Lisa Dursey to the firm.

Prior to joining ERISA Benefits Law, Lisa practiced employee benefits at Stoel Rives in Seattle from 2016 to 2020, and corporate transactions at Alston & Bird in New York City from 2013-2016. Lisa received her law degree, cum laude, from Boston University in 2012, and a BA in Science and Technology Studies, with honors, from Cornell University in 2008.

Lisa D. Dursey
LDursey@ERISABenefitsLaw.com
(206) 618-9363 (Seattle)
(602) 282-0313 (Arizona)
Bio: https://erisabenefitslaw.com/lisa-dursey/
Hourly Billing Rate: $295

Lisa’s ERISA practice focuses on advising employers on the design, implementation, and administration of all types of employee benefits plans. She is passionate about providing comprehensive, easily digestible, and pragmatic advice for her clients. Clients seek her guidance to help them realize the maximum value from their employee benefit programs.

Lisa assists clients with a wide range of benefits matters, including qualified and nonqualified retirement plans, executive compensation programs, health and welfare programs, and other fringe benefit programs. She regularly advises employers on design changes to their benefit plans to address regulatory updates and to optimize the company’s benefit offerings. Lisa is also experienced in helping plan sponsors correct operational failures, including through corrective filings with the IRS and Department of Labor when necessary. 

Lisa’s addition provides ERISA Benefits Law further depth to meet our clients’ needs. Lisa and Erwin will bring a team approach to each client and each matter, allowing us to apply the necessary expertise to continue solving your ERISA and employee benefits-related legal issues as efficiently and effectively as possible.

Learn More – Lisa’s Full Bio

DOL Final Rule Facilitates Retirement Plan Electronic Disclosures

The U.S. Department of Labor (DOL) published a final rule on May 27, 2020 that will allow employers to post retirement plan disclosures online or deliver them to employees by email, as a default. The DOL believes this will make it easier for employers to furnish retirement plan disclosures electronically, reducing administrative expenses and making disclosures more readily accessible and useful for employees.

Background

There are approximately 700,000 retirement plans covered by ERISA, covering approximately 137 million participants. ERISA-covered retirement plans must furnish multiple disclosures each year to participants and beneficiaries. The number of disclosures per year depends on the specific type of retirement plan, its features, and for defined benefit plans, the plan’s funding status.

Delivery methods for ERISA disclosures must be reasonably calculated to ensure that workers actually receive the disclosures. To deliver disclosures electronically, plan administrators previously had to rely on a regulatory safe harbor established by the DOL in 2002. See 29 CFR 2520.104b-1(c).

On August 31, 2018, the President issued Executive Order 13847, directing the DOL to review whether regulatory or other actions could be taken to make retirement plan disclosures more understandable and useful for participants and beneficiaries and to focus on reducing the costs and burdens that retirement plan disclosures impose on employers and others responsible for their production and distribution. The Order specifically emphasized that this review include an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of the disclosures and to reduce their associated costs and burdens.

New Voluntary Safe Harbor

The new electronic disclosure rule establishes a new, voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail. The new safe harbor permits the following two optional methods for electronic delivery:

  1. Website Posting. Plan administrators may post covered documents on a website if appropriate notification of internet availability is furnished to the electronic addresses of covered individuals.
  2. Email Delivery. Alternatively, plan administrators may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

Retirement plan administrators who comply with the safe harbor will satisfy their statutory duty under ERISA to furnish covered documents to covered individuals. The safe harbor is limited in the following respects:

Limited Scope of the New Safe Harbor

The safe harbor is limited to retirement plan disclosures.

A plan administrator may use this safe harbor only for “covered individuals.” To be a covered individual, the person must be entitled under ERISA to receive covered documents and must have a valid electronic address (e.g., email address or smart phone number).

The new safe harbor does not supersede the 2002 safe harbor; the 2002 safe harbor remains in place as another option for plan administrators.

Protections for Plan Participants

The new safe harbor includes a variety of protections for covered individuals, including:
1. Right to Paper. Covered individuals can request paper copies of specific documents, or globally opt out of electronic delivery entirely, at any time, free of charge.

2. Initial Notification. Covered individuals must be furnished an initial notification, on paper, that the way they currently receive retirement plan disclosures (e.g., paper delivery in the US mail) is changing. The notice must inform them of the new electronic delivery method, the electronic address that will be used, and the right to opt out if they prefer paper disclosures, among other things. The notice must be given to them before the plan may use the new safe harbor.

3. Notifications of Internet Availability. Covered individuals generally must be furnished a notice of internet availability (NOIA) each time a new covered document is made available for review on the internet website.

To avoid “notice overload,” the final rule permits an annual NOIA to include information about multiple covered documents, instead of multiple NOIAs throughout the year.

The NOIA must briefly describe or identify the covered document that is being posted online, include an address or hyperlink to the website, and inform the covered individual of the right to request paper copies or to opt out of electronic delivery altogether.

The NOIA must be concise, understandable, and contain only specified information.

4. Website Retention. Covered documents must remain on an internet website until superseded by a subsequent version, but in no event for less than one year.

5. System Check for Invalid Electronic Addresses. Plan administrators must ensure that the electronic delivery system is designed to alert them if a participant’s electronic address is invalid or inoperable. In that case, the administrator must attempt to promptly cure the problem, or treat the participant as opting out of electronic delivery.

6. System Check at Termination of Employment. When someone leaves their job, the plan administrator must take steps to ensure the continued accuracy and operability of the person’s employer-provided electronic address.

Effective Date & Immediate Availability

The new safe harbor is effective July 27, 2020 (60 days after its publication in the Federal Register). However, the DOL, as an enforcement policy, will not take any enforcement action against a plan administrator that relies on this safe harbor before that date.

DOL and IRS Extend Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak

On May 4, 2020, the Employee Benefits Security Administration (EBSA, which is part of the U.S. Department of Labor) and the Internal Revenue Service (IRS) issued joint guidance extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under ERISA and the Code.

This guidance will require Plan Sponsors to temporarily revise their administrative practices and their form notices used in connection with COBRA, HIPAA’s Special Enrollment rights, and ERISA Claim Procedures.

I. Background

HIPAA requires group health plans to provide special enrollment rights for certain people upon the loss of eligibility for other coverage, or upon the addition of a dependents due to birth, adoption, etc. Generally, group health plans must allow such individuals to enroll in the group health plan if they are otherwise eligible and if enrollment is requested within 30 days of the occurrence of the event.

COBRA permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage. COBRA generally provides a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan. Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election. COBRA continuation coverage may be terminated for failure to pay premiums timely.

Under the COBRA rules, a premium is considered paid timely if it is made not later than 30 days after the first day of the period for which payment is being made. Notice requirements prescribe time periods for employers to notify the plan of certain qualifying events and for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe a time period for plans to notify qualified beneficiaries of their rights to elect COBRA continuation coverage.

ERISA requires plans to establish and maintain reasonable claims procedures and imposes additional rights and obligations with respect to internal claims and appeals and external review for non-grandfathered group health plans.

II. Temporary Extensions Under the Guidance

All of the foregoing provisions include timing requirements for certain acts in connection with employee benefit plans, some of which have been temporarily modified by the new guidance. These changes, and the implications for Plan Sponsors, are summarized below.

A. Relief for Plan Participants, Beneficiaries, Qualified Beneficiaries, and Claimants

Subject to a one year statutory duration limitation, all group health plans, disability and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—

(1) The 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA section 701(f) and Code section 9801(f)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure the extended special enrollment period is implemented for the duration of the Outbreak Period, which could require retroactive coverage as far back as March 1.
  • Determine whether and how to communicate the extension to employees.

(2) The 60-day election period for COBRA continuation coverage under ERISA section 605 and Code section 4980B(f)(5)

(3) The date for making COBRA premium payments pursuant to ERISA section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C)

(4) The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 606(a)(3) and Code section 4980B(f)(6)(C)

Implications for Employers:

  • This exacerbates the adverse selection issue inherent in COBRA because Plans may have to provide retroactive coverage for many months.
  • The problem is made worse by the fact that, even though qualified beneficiaries theoretically have to pay for the retroactive coverage, if they elect COBRA right after the qualifying event, they do not have to pay until after the Outbreak Period ends. This means a qualified beneficiary could elect COBRA and receive the coverage) and then subsequently decide not to pay for it. Plan Sponsors and insurers will then have the option of retroactively terminating the coverage and trying to adjust the claims already paid.
  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended COBRA periods.
  • Either temporarily revise your COBRA notices and forms or ensure a temporary cover is added to all COBRA communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

(5) The date within which individuals may file a benefit claim under the plan’s claims procedure pursuant to 29 CFR 2560.503-1

(6) The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure pursuant to 29 CFR 2560.503-1(h)

Implications for Employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claims periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.
  • This will impact health flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”) that have run-out periods that extended beyond March 1, 2020. Because the Outbreak Period began on March 1, 2020, any health FSAs and HRAs that have March or April deadlines for submitting prior-year expenses for reimbursement, will need to extend the deadline until 60 days after the Outbreak Period ends to submit expenses for reimbursement for the 2019 plan year.

(7) The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination pursuant to 29 CFR 2590.715-2719(d)(2)(i) and 26 CFR 54.9815-2719(d)(2)(i), and

(8) The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete pursuant to 29 CFR 2590.715-2719(d)(2)(ii) and 26 CFR 54.9815-2719(d)(2)(ii)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claim review periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

B. Relief for Group Health Plans

With respect to group health plans, and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D).

Implication for Employers:

  • Plan administrators are not required to provide the COBRA election notice during the Outbreak Period. As a practical matter, however, plan administrators likely will want to timely provide election notices to encourage qualified beneficiaries to timely elect and pay for COBRA coverage.

Erwin Kratz Discusses Fiduciary Compliance for Plan Sponsors

ERISA Benefits Law attorney Erwin Kratz was a panelist on “ERISA Principles That Every Plan Fiduciary Needs to Know”, presented by Wellspring Financial Partners on February 19, 2020. Erwin joined Eric Dyson of Wellspring, who discussed the four main fiduciary duties – the duties of Loyalty, of Prudence, to Diversify Plan Assets and to Follow the Plan Documents.

Erwin then provided practical tips for fiduciary compliance by discussing four points of impact when the “fiduciary rubber” most frequently hits the road:

  • When Restating your Plan
  • Top Three Mistakes a Committee Can Make
  • How to be a Good Committee Member; and
  • Working with your Non-Fiduciary Administrative Staff

View the YouTube video here:

And download a copy of the PowerPoint Presentation here: