COVID-19 Deadline Extensions—No More Time Outs but No Single Deadline Either!!

By Brian M. Johnston, Joy M. Napier-Joyce and Monique Warren on

We recently provided an update on the looming end date for COBRA and other deadline extensions and the uncertainty that continues to add to the administrative burdens without more clarity from the DOL and IRS.  Message received, apparently.

On behalf of the IRS, the DOL has now released Disaster Relief Notice 2021-01 that attempts to resolve a potential conflict with other statutory guidance under ERISA Section 518 and Code Section 7508A, which technically limits the allowable deadline extension period to a maximum of 1 year.  Unfortunately, this now results in new deadlines that can apply immediately and will differ based on individual events.  Fortunately, the DOL recognizes this will be complicated and burdensome to many so they also offer welcomed commentary that will provide relief to employers and plan administrators who take reasonable steps to comply.

Under the new guidance, COBRA, HIPAA Special Enrollment, claims and appeals timeframes, and other applicable deadlines that were previously extended indefinitely are now subject to a deadline that ends as of the earlier of: (1) one year from the date the deadline would have occurred on or after March 1, 2020, absent the previous extension guidance, or (2) the end of the Outbreak Period as previously defined.  The Notice provides a helpful example: if a qualified beneficiary would have originally been required to make a COBRA election to continue health insurance coverage by March 1, 2020, that person now technically will need to have made this election by March 1, 2021.  If the individual was to have made an election (or COBRA payment) by May 15, 2020, they will still have until May 15, 2021, (provided the Outbreak Period has not ended).  If that individual was recently terminated and ordinarily (by statute) would be required to make a COBRA election by April 1, 2021, that person will still have the ability to defer the election until the end of the Outbreak Period (or April 1, 2022, if that were to come first).  Employers have the same rolling 1-year maximum period to issue any required notifications.

The Notice also provides in part, “plan fiduciaries should make reasonable accommodations to prevent the loss or undue delay in payment of benefits…and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.”  This opens up the possibility for additional extensions of deadlines where facts and circumstances would argue for additional flexibility.  The Notice helpfully notes that enforcement “will be marked with an emphasis on compliance assistance and includes grace periods and other relief”, as long as the plan administrators and other “fiduciaries…have acted in good faith and with reasonable diligence under the circumstances.”

What This Means to Employers and Plan Administrators

While the above language from the Notice acknowledges that the agencies understand and appreciate the complications this latest guidance creates for plan administrators to immediately restart the clock of daily COBRA, HIPAA, and other deadlines and for individuals who now must immediately catch up monthly COBRA premium obligations to maintain health insurance under the employer’s plan, the reality is that plan sponsors need to address administrative compliance with all deadlines now.

Plan sponsors should discuss next steps with counsel and third-party administrators to weigh all options and obligations. To be considered as acting in “good faith and with reasonable diligence,” we recommend following these steps:

  • Contact all COBRA and other third-party administrators to execute a plan of action for notification to all existing and COBRA eligible individuals regarding any applicable deadlines.
  • For individuals who have deferred making a COBRA election for any periods on or after March 1, 2020, consider whether new notices should be issued with updated coverage and rate options, and current election and payment deadlines. Consider starting the deadlines from the date that notice is mailed so the individual has a fair opportunity to evaluate the need for coverage.
  • For those who are already enrolled in COBRA but who have been deferring payment for coverage, provide initial notice and demand payment of all prior months’ premiums that may be owing. Where this involves many months, consider providing a period over which such individuals can make installment payments with a “grace period” for full and complete payment before COBRA coverage terminates.
  • Establish and communicate claims run-out periods for Flexible Spending Accounts and other applicable benefits.
  • Consider additional communications reminding all affected individuals of the availability of coverage via healthcare.gov, which may be a less expensive option for many and does not require retroactive enrollment to the date coverage was lost as required under COBRA.

We are available to help employers and plan administrators evaluate how this new guidance impacts their employee benefit plans.  Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

Is Relief for the Plight of Multiemployer Pension Plans in the Works?

By Paul A. Friedman on

I – Overview of the Butch Lewis Emergency Pension Plan Relief Act

The much-heralded Butch Lewis Emergency Pension Plan Relief Act of 2021 (the “Butch Lewis Act of 2021”) is closer to becoming a reality as part of the COVID-19 relief bill, which is set for a vote in the House of Representatives on February 26, 2021. The Butch Lewis Act of 2021 strives to address the plight of multiemployer and single-employer pension plans in the wake of COVID-19. Here we discuss only the multiemployer pension plans.  Representative Richard Neal (D-MA), chairman of the Ways and Means Committee of the House, proposed this bill. The bill has been fast-tracked.

Specifically, the proposed legislation offers several forms of relief to struggling multiemployer plans, including:

  1. Retention of a plan’s zone status at the beginning of the 2019 plan year for the plan years beginning in 2020 or 2021 (meaning that plans in “endangered or critical status” could delay updating the plan or schedules until the plan year beginning March 1, 2021);
  2. Extension of rehabilitation period by five years for plans in “endangered or critical status” for plan years beginning in 2020 or 2021 (effective for plan years beginning after December 31, 2019);
  3. Permission for plans to use a thirty-year amortization base to spread out losses (effective for plan years ending on or after February 29, 2020); and
  4. Freeze of the cost of living adjustment.

No provisions provide any monies to pension funds.

Rather, under the Special Financial Assistance Program for Financially Troubled Multiemployer Pension Plans, a portion of the Butch Lewis Act of 2021, monies will be provided to aid approximately 10 million Americans that participate in multiemployer pension plans, 1.3 million of whom are stuck in quickly sinking plans.

  1. What does this Program do? Through this program, the Pension Benefit Guaranty Corporation (the “PBGC”) would send payments directly to eligible multiemployer pension plans. It also would raise the PBGC multiemployer plans premium rate to $52 per participant as of 2031.
  2. Which multiemployer pension plans are eligible? These plans are eligible:
    • Plans in “critical and declining status” (within the meaning of section 305(b)(6) of ERISA) in any plan year beginning in 2020 through 2022.
    • Plans with a modified funded percentage of less than 40% with more retirees than active workers (less than 2:3 ratio) in any plan year from 2020 through 2022. Under the Act, modified funded percentage means “the percentage equal to a fraction the numerator of which is current value of plan assets and the denominator of which is current liabilities.”.
    • Plans that became insolvent (under section 418E of the Internal Revenue Code of 1986) after December 16, 2014, and have remained insolvent.

Eligible funds must apply to the Program no later than December 31, 2025.

  1. How much will eligible plans be receiving? After a plan’s application is approved, the PBGC will make a single, lump-sum payment in the amount required for the plan “to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051 with generally no reduction in a participant’s or beneficiary’s accrued benefit.” Essentially, the PBGC would be paying all pension benefits owed to retirees. There is no cap on this payment, and the funding predictions will be performed on a “deterministic basis.”
  2. Do the payments come with any obligations? Plans would have to reinstate benefits that were suspended and invest the monies in investment-grade bonds or other investments allowed by the PBGC.
  3. Does this Program affect employers? Not immediately. An employer’s withdrawal liability will still be calculated without consideration of the payment received under the Program until the plan year beginning 15 calendar years after the effective date of the special financial assistance. Eligible plans would have to provide employers with an estimate of the employer’s share of the plan’s unfunded vested benefits (accounting for any payment under the Program) as of the end of each plan year.

II – Practical Application of the Butch Lewis Emergency Pension Plan Relief Act

The Butch Lewis Act of 2021’s lofty goals seem promising, but employers and pension beneficiaries should be wondering how this Act will operate. Questions regarding how many pension plans will require relief, and practical considerations about how the PBGC will secure the funding to relieve the eligible plans, remain up in the air.

Interestingly, there may be fewer eligible funds than predicted. Milliman’s December 2020 Multiemployer Pension Funding Study concluded that the aggregate funded percentage for all multiemployer pension plans as of December 31, 2020, was 88%, the highest percentage it has been since before the 2008 market crash. However, this study relies predominately on data from Form 5500s from the 2018 and 2019 plan years. Per Milliman, the impact of COVID-19 is thus only reflected on investment returns, and not plan participation or contribution levels.

But the study provides valuable insight into the potential number of pension plans eligible for the Special Financial Assistance Program. Only 124 pension plans were designated as “critical and declining” as of December 31, 2020. These plans are projected to remain underfunded through 2025. From these figures, at least 124 pension plans will be eligible for the Special Financial Assistance Program.

The PBGC’s 2020 Annual Report reflects the looming insolvency of its Multiemployer Program by 2027. While federal funding from the Bipartisan American Miners Act of 2019 to the United Mine Workers of American 1974 Pension Plan staved off PBGC’s insolvency for an extra year, the reality remains dire. When the Multiemployer Program becomes insolvent, the PBC can no longer provide financial assistance to pay the current level of guaranteed benefits in insolvent plans.

This projected insolvency directly conflicts with the goals of the Butch Lewis Act of 2021, which would cause the PBGC to pay essentially all pension benefits owed to retirees from the date of the Act’s enactment to the last day of the plan year ending in 2051.

If the PBGC Multiemployer Program is on the brink of insolvency, how can it pay such hefty lump-sum payments to roughly 124 pension plans? The text of the Act does little to answer this question. The text of the Butch Lewis Act of 2021 provides that “an eighth fund shall be established for special financial assistance to multiemployer pension plans,” and that funds will be appropriated from the general fund to provide for the costs of providing financial assistance. And this eighth fund will be “credited with amounts from time to time as the Secretary of Treasury, in conjunction with the Director of the PBGC, determines appropriate, from the general fund of the Treasury.” Thus, the practical application of the Butch Lewis Act of 2021 remains unclear.

Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

COVID-19 Deadline Extensions—Still Relevant to Plan Sponsors?

By Joy M. Napier-Joyce, Craig A. Day and Brian M. Johnston on

In May of 2020, the Department of Labor (DOL) and Internal Revenue Service (IRS) released joint-agency guidance that extended several important deadlines for employees, including COBRA election and payment deadlines, HIPAA Special Enrollment deadlines, and claims submission and appeal deadlines.  Under the guidance, plan administrators were required to extend the deadlines that would otherwise apply for any individuals affected between March 1, 2020, until 60 days after the end of the National Emergency (also known as the “Outbreak Period”).  Although the guidance was generally well-received when issued, it has since raised confusion and administrative difficulties due to the length of the Outbreak Period.  Keeping open-ended COBRA election periods without payment of employee premiums has caused administrative difficulties and resulted in varying approaches amongst administrators to ensure plans don’t experience claims risk for periods of now up to 12 months in many cases.

When the guidance was issued, no one imagined that the Outbreak Period would realistically last for more than a year.  Because it is now clear the National Emergency will continue for several more months, the problem that has inadvertently arisen is this extension guidance is now at risk of directly conflicting with statutory guidance under ERISA Section 518 and Code Section 7508A, as amended under the CARES Act to include public health emergencies, like COVID, to the list of circumstances (that previously were comprised of declared disasters, terrorism, and military action, etc.) that allow for up to a one-year extension for applicable deadlines such as those dealt with under the extension guidance above.  This maximum one-year extension for each of the above-referenced deadlines will end on February 28, 2021, however, there has been no direction from the agencies as to how or when plan administrators can reinstitute applicable deadlines.

The agencies know the issue and are evaluating alternatives, but we have been told they likely will not have a solution before February 28, 2021, the end of the maximum statutory one-year extension.  What are employers to do in the meantime?  This is a hotly debated topic amongst employers, attorneys, third-party administrators, and consultants.  Many suggest that employers have no choice but to now enforce the previous deadlines as if the Outbreak Period has ended.  Even that conclusion still leaves open questions, such as does that mean that affected individuals should now be given 60 days from March 1, 2021, to enroll in COBRA and make payments? An additional 30 days to make up all prior COBRA payments deferred for those previously enrolled?

Ultimately, plan sponsors should discuss their next steps with counsel and third-party administrators to weigh all options.  Employers can still rely on the guidance that exists today to support continuing to extend deadlines.  The National Emergency is ongoing and there is good reason to continue to extend all deadlines until further guidance is received.  Even if the DOL and IRS announce an end to the Outbreak Period based on the one-year statutory framework, the agencies typically provide a period of relief for those who in good faith comply with current guidance.  Many are anxiously awaiting directions and we will keep our readers apprised of any developments.

We are available to help employers and plan administrators understand and evaluate how these issues impact their employee benefit plans.  Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

U.S. Supreme Court: Courts Can Review Railroad Retirement Board’s Refusal to Reopen Claims

By Lindsey H. Chopin and Stacey C.S. Cerrone on

In a 5-4 decision, the U.S. Supreme Court has ruled that federal courts can review decisions by the U.S. Railroad Retirement Board denying claimants’ requests to reopen prior benefits denials. Salinas v. U.S. R.R. Ret. Bd., No. 19-199 (Feb. 3, 2021).

Justice Sonia Sotomayor, writing for the majority, explained the relevant provision of the Railroad Retirement Act (RRA) makes judicial review available under that statute to the same extent that review is available under the Railroad Unemployment Insurance Act (RUIA). Thus, the case turned on the plain meaning of the RUIA’s judicial review provision in Section 355(f). Section 355(f) provides that any claimant, certain railway labor organizations, certain of the claimant’s employers, or “any other party aggrieved by a final decision under [§355(c)]” may obtain court review “of any final decision of the Board.”

The majority construed the broad phrase “any final decision,” as referring to “some kind of terminal event” and an agency action from which legal consequences will flow. The Court concluded that the Board’s denial of the claimant’s request to reopen his claim met those criteria: the denial was the “terminal event” in the Board’s administrative review process and it affected rights and obligations under the RRA. Thus, the Board’s denial was subject to judicial review. In reaching that decision, the majority also cited the strong presumption favoring judicial review of administrative action. Chief Justice John Roberts and Justices Stephen Breyer, Elena Kagan, and Brett Kavanaugh joined in the majority opinion.

Justice Clarence Thomas authored a dissenting opinion, which was joined by Justices Samuel Alito, Neil Gorsuch, and Amy Coney Barrett. The dissenting opinion asserted that the case should turn on the RRA’s judicial review provision, which references the RUIA to explain how to obtain judicial review, but separately defines what may be reviewed.

The Court’s decision resolves a long-standing split among the Circuit Courts of Appeals on this issue.

Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions about this case or need assistance.

What Took So Long? Democrats Quickly Introduce Pension Relief Bill

By Robert R. Perry and David M. Pixley on

House Ways and Means Committee Chairman Richard Neal (D-Mass.) introduced the Emergency Pension Plan Relief Act of 2021 (EPPRA) on January 21, 2021. EPPRA represents the latest legislative attempt to address the well-documented multiemployer pension crisis.

EPPRA is significant in that it is the first legislation introduced by Chairman Neal under the Biden administration, signaling a possible renewed emphasis on solving the multiemployer pension crisis by the incoming administration. (A summary of EPPRA is available.) More…

BlackRock 401(k) Plan Class Action Headed for Trial

By Stacey C.S. Cerrone, René E. Thorne and Howard Shapiro on

A class action alleging that BlackRock entities favored their own proprietary funds when selecting investment options for BlackRock’s 401(k) Plan is headed for trial after Judge Haywood S. Gilliam, Jr. denied both parties’ motions for summary judgment on January 12, 2021. Baird v. BlackRock Inst’l. Trust Co., No. 17-1892 (N.D. Cal. Jan. 12, 2021).

BlackRock sought summary judgment on Plaintiffs’ claims for breaches of fiduciary duty. The court denied the motion for several reasons. First, the court held that summary judgment was precluded because a genuine dispute of a material fact existed as to whether BlackRock complied with the Plan’s Investment Policy Statement. Next, the court held that Defendants’ “loss causation” arguments involved weighing the parties’ respective experts and their methodologies, “a task which is inappropriate at the summary judgment stage.”

The court then turned to whether certain of Plaintiffs’ prohibited transaction claims were time-barred because they were not brought within six years after “the date of the last action which constituted a part of the breach or violation.” 29 U.S.C. § 1113(1). BlackRock argued the only relevant transaction for claims based on including a fund in a plan line up is the date the fund is initially added. The court rejected the argument, reasoning that (1) the case law did not support such a broad proposition, and (2) Plaintiffs’ claims were not based solely on including the challenged funds, but also involved the fees paid to BlackRock affiliates.

Finally, the court found that summary judgment was inappropriate on the merits of Plaintiffs’ prohibited transaction claims, maintaining the prohibited transaction exemptions required examination of the reasonableness of compensation received by the Defendants, which required resolution of disputed issues of fact.

The court likewise denied Plaintiffs’ motion for partial summary judgment as to liability. Trial is scheduled to begin on March 1, 2021.

Mandatory COVID-19 Benefits Under Families First Coronavirus Response Act Have Ended, Now What?

By Jenifer M. Bologna on

In March 2020, when Congress passed the Families First Coronavirus Response Act (FFCRA) with a sunset date of December 31, 2020, few anticipated the COVID-19 pandemic would be ongoing into 2021. Several similar state and local laws also sunset at the end of 2020. But the pandemic has not slowed, and requests for COVID-19-related leave (along with the corresponding tax credits) continue.

Here’s What We Know

The new stimulus bill (Consolidated Appropriations Act, 2021) passed on December 27 did not extend the FFCRA obligations. Employers who were covered under the FFCRA are no longer obligated to provide their employees leave.  More…

Wellness Programs and Water Bottles, the EEOC Proposes New Rules under the ADA and GINA

By Joseph J. Lazzarotti on

Since 1996, when Congress passed the Health Insurance Portability and Accountability Act (HIPAA), employers have been struggling with whether and to what extent they could offer incentives to employees to participate in certain “wellness programs.” The Equal Employment Opportunity Commission’s (EEOC) position on these programs has been a significant driver of those struggles, primarily due to concerns about whether such programs are “voluntary.”

On January 7, the EEOC proposed a new approach that may provide employers some certainty, particularly as many employers are wondering about incentives to encourage employees to receive a COVID-19 vaccine. The agency proposed regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) which, for those interested, provides a brief history of wellness programs, and EEOC’s evolving position concerning same.

A (Very) Brief History

In short, the EEOC stated its position on voluntariness in 2000, in its Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act: a wellness program is “voluntary” as long as an employer “neither requires participation nor penalizes employees who do not participate.” See Q/A 22.

During that time and moving forward, however, other federal agencies which regulated group health plans (Health and Human Services, Department of Labor, and Internal Revenue Service) provided a regulatory path for employers to incentivize employees to participate in certain wellness programs. A version of those rules were codified in the Affordable Care Act (referred to herein as the “ACA/HIPAA rules”), evidencing Congress’ intent to permit such incentives, albeit subject to other federal laws, such as ADA and GINA. The EEOC’s initial attempt to harmonize by regulation its position on wellness programs with the ACA/HIPAA rules failed when its regulations addressing incentives were judicially vacated. These new proposed regulations take a different approach.

The Proposed Regulations.

The EEOC proposed two sets of regulations – one under the ADA and one under GINA:

ADA.

Under the ADA proposed rule, a wellness program is a program of health promotion or disease prevention that includes disability-related inquiries or medical examinations. Disability-related inquiries, such as health risk assessments and biometric screenings, generally include a series of questions “likely to elicit information about a disability,” while medical examinations are procedures or tests that seek information about an individual’s physical or mental impairments or health. Programs that do not include disability-related inquiries or medical examinations (e.g., rewarding employees for attending a smoking cessation class) would not be subject to the ADA proposed rule. The rule also would incorporate essentially the same subcategories of wellness programs as under the ACA/HIPAA rules – participatory and health contingent. Read More

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