Posted By Christopher J. Ciminera, CPA, QKA
Throughout the COVID-19 pandemic, the Employee Benefits Security Administration (EBSA) had been relatively quiet on retirement plan compliance relief. That changed with Disaster Relief Notice 2020-01 issued on April 29, 2020. This notice provides guidance and relief for employee benefit plans due to the COVID-19 outbreak.
Time Period Covered
The notice applies from the period March 1, 2020, up until 60 days after the announcement of the end of the COVID-19 national emergency or such other date announced by the DOL in a future notice.
Coordination with the IRS
The IRS, Treasury Department, and other agencies have concurred with the relief specified by the EBSA in this notice.
Below are provisions in the notice specifically relating to retirement benefits. The notice also includes other provisions for health plans that are not covered here.
Extension of Deadlines
The notice provides additional time for the furnishing of notices, disclosures, and other documents required by Title 1 of ERISA.
The notice states that fiduciaries must act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. This includes using alternative electronic means of communication with participants and beneficiaries including email, text messages, and continuous access websites.
Verification Procedures for Loans and Distributions
The notice provides relief for failure to follow certain procedural requirements imposed by the terms of the plan if:
1. The failure is solely attributable to the COVID-19 outbreak,
2. A plan administrator makes a good-faith diligent effort under the circumstances to comply with the requirements, and
3. The plan administrator makes a reasonable attempt to correct procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable.
It is important to note that this relief DOES NOT include the failure to obtain spousal consent. This consent is still required.
Certain Issues Created from the CARES Act
The CARES Act increased the loan limit to 100% of an employee’s accrued benefit, up from 50% where the other 50% of the participant’s account was used as collateral for the loan. The DOL indicated that it will not treat this increase in loan limit as violating ERISA’s requirement for adequate security and the need for the plan provision to be offered on a reasonably equivalent basis since the expanded provisions in the CARES Act only apply to qualifying individuals.
The notice indicates that the plan amendment for the CARES Act loans and distribution provisions must be made on or before the last day of the first plan year beginning on or after January 1, 2022, and must meet the conditions of the CARES Act.
Timing of Deposits of Contributions and Loan Repayments
Relief was given for any lags in deferral and loan repayment deposits solely due to administrative burdens, assuming that the deposits were made as soon as administratively feasible. See my previous blog on this topic for further details.
The notice provides an exception to the 30-day advance notice (Blackout Notice) to participants and beneficiaries during a blackout period.
ERISA Fiduciary Compliance Guidance
The notice provides that it understands plan administration problems and issues may occur due to COVID-19. It indicates that when operating a plan, the guiding principle is that fiduciaries must act reasonably, prudently, and in the interest of the covered workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic wellbeing.
In addition to this notice, the DOL provided a FAQ to help participants and plan sponsors.