On April 27, 2020, the U.S. Supreme Court ruled in Maine Community Health Options v. United States that health insurance companies that lost money on policies offered on the health benefit exchanges created by the Affordable Care Act (ACA) were entitled to recoup those losses from the government. Background Congress created “risk corridors” as part of the ACA to help health insurance companies balance the risk of offering plans to previously uninsured Americans since insurers would have difficulty predicting the cost of health care for these new participants. Section 1342 of the ACA addressed this problem by allowing insurers to…

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes provisions that allow retirement plan sponsors to provide plan participants the opportunity to withdraw funds from a defined contribution retirement plan — IRA, 403(b), 457(b) or 401(k) — if they are facing adverse financial consequences due to the COVID-19 pandemic. Withdrawal Qualifications The CARES Act allows for withdrawals of up to $100,000 from defined contribution retirement plans with the following tax benefits: 10% tax penalty is waived, although withdrawals are still taxed as ordinary income. Withdrawals will not be subject to mandatory withholding, which is typically 20% for 403(b)…

On May 27, 2020, the Department of Labor (DOL) published its final rule on Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA, establishing a new alternative safe harbor that allows benefit plan administrators to provide ERISA retirement plan disclosures to plan participants via email, website posting, or mobile app with relaxed requirements. Those who still wish to receive hard copies of disclosures may opt out of electronic delivery and receive paper copies. Notably, this new rule does not apply to health and welfare plan disclosures. Plan Document Delivery Under the new rule, plan administrators may provide documents…

Under Section 4003 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Secretary of the Treasury is authorized to provide up to $500 billion in loans, loan guarantees, and other investments to support eligible businesses, states, and municipalities affected by the COVID-19 pandemic. Section 4004 of the CARES Act imposes limits on executive compensation as a condition of receiving this relief. Executive Compensation Limits Section 4004 executive compensation limits begin on the execution date of a loan or loan guarantee, and they end one year after the loan or loan guarantee has been satisfied (the “restriction period”).…

The Coronavirus Aid, Relief, and Economic SecurityAct (CARES Act) has extended several important deadlines for sponsors of 403(b) and defined benefit plans: Initial remedial amendment period for 403(b) plans extended to June 30, 2020.  The initial remedial amendments deadline for 403(b) plans has been extended by three months, from March 31, 2020, to June 30, 2020.  Plan sponsors now have additional time to restate or update their documents, including correcting any form defects in their plan documents retroactive to January 1, 2010 per Revenue Procedure 2019-39. Minimum funding contribution delay for single-employer defined benefit plans until January 1, 2010.…

Thanks to a provision in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), public employers may now allow their employees to access their retirement savings to help them cope with the financial impact of the COVID-19 pandemic. Prior to the enactment of this emergency retirement plan distribution option under the CARES Act, working employees were unable to receive distributions from governmental 457(b) plans with a few exceptions, including a limited exception for an “unforeseeable emergency.” While the existing rules for public employees to access their 457(b) accounts remain in place, the CARES Act provides more favorable distribution rules…

Many companies facing financial pressure from the COVID-19 pandemic are examining opportunities to curtail operating costs, including the reduction or suspension of matching or nonelective contributions to 401(k) plans.  Here are some considerations to help guide your decision-making when determining whether to reduce or suspend safe-harbor contributions: Reduction or Suspension of Employer Contributions to Non-Safe-Harbor Plans Discretionary contribution plans. If the company’s plan includes discretionary employer contributions rather than a specific formula or defined contribution amount, the company’s board can elect to change the matching contribution amount — including suspending it altogether until further action is taken by the board. …