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DOL Issues Final Electronic Disclosure Rule for Retirement Plans

Under the recently published final rule issued by the US Department of Labor, retirement plan administrators can choose to deliver required disclosures electronically by complying with the conditions of a new safe harbor. The final rule represents an opportunity for retirement plans to save costs and enhance participant access to disclosure documents.

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Pandemic Unemployment Aid Intensifies Debate Over Classifying Gig Workers

The federal Pandemic Unemployment Assistance program extends relief to workers and employees who don’t have access to state benefits, but it will almost certainly put pressure on gig economy companies to start paying into state unemployment insurance funds as government resources continue to diminish due to COVID-19, attorneys say.

Michelle S. Strowhiro, partner at McDermott Will & Emery, said, “To the extent that, post-COVID, we want to maintain unemployment benefits for those traditionally not eligible, … we’d have to contemplate a way that additional funding could be accessed for the long term.”

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DOL Issues New Proposed Rule for Electronic Disclosures of Retirement Plan Notices

The Department of Labor (DOL) issued a proposed rule that, if finalized, would expand its existing guidance and liberalize rules for electronic disclosure of retirement plan notices under ERISA. The proposed rule, which sets forth a notice and access safe harbor, would permit electronic disclosure as the default method of delivery while permitting participants to opt out and continue to receive paper disclosures.

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4 Ways to Manage Retirement Plan Data in New Era of Cybersecurity

IBM estimated last year that data breaches cost companies $148 per stolen record. Given that, not surprisingly, many employers have grown increasingly concerned about the potential impact of such breaches, including breaches that may affect employer-sponsored benefit plans.

Courts have not yet formally addressed whether ERISA requires benefit plan fiduciaries to manage cybersecurity risks. However, a federal district court recently rejected a motion to dismiss filed by defendants seeking to avoid liability for fraudulent distributions from a plan caused by cyber criminals. There, the court held that the defendants were plan fiduciaries and that the plaintiffs had pled facts sufficient to allege that the defendants breached their fiduciary duties. Although this decision only relates to a motion to dismiss, the case underscores the potential for plaintiffs to assert, even in the absence of clear guidance, that plan fiduciaries are not doing enough to protect plan participants from cybersecurity risks.

As a result, with cybersecurity concerns on the rise, plan fiduciaries are continuing to enhance their focus on the best ways to protect employee data. Recently, on Law360, McDermott’s Mark E. Schreiber discussed four helpful tips for handling cybersecurity risks.

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Bipartisan Bill Paves the Way for Significant Retirement Plan Reforms

The House recently passed the most significant piece of proposed retirement plan legislation in more than a decade: the SECURE Act. Although the Senate must also approve the bill before it becomes law, its proposed changes have considerable bipartisan support in Congress. Plan sponsors should start considering how changes included in the SECURE Act could impact their retirement plans. Employers who do not currently offer retirement plans should also review the new retirement plan incentives included in the proposed legislation.

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Fridays With Benefits Webinar | Quick & Easy Recipes for Fixing 401(k) Plans

Join us Friday, May 17, as Allison Wilkerson, Brian Tiemann and Sarah Engle join host Judith Wethall to talk through the value of conducting a proactive self-audit of 401(k) plans. They will provide best practices designed to reduce the risk of costly government investigations. Attendees will come away prepared and confident in their position, and ready to respond assertively if an investigation comes to pass.

Our lively 45-minute discussion will cover the following points:

  • Self-auditing common compliance issues raised during IRS audits, including errors in administering the plan’s eligibility rules, compensation definition, loan procedures and minimum required distribution provisions
  • Self-auditing common issues raised during DOL audits, including late payroll deposits
  • Tips to enhance plan governance procedures

Friday, May 17, 2019

10:00 – 10:45 am PST
11:00 – 11:45 am MST
12:00 – 12:45 pm CST
1:00 – 1:45 pm EST

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DOL Offers Interim Relief for Employers’ Association Health Plans

Last week, the Department of Labor (DOL) responded to the district court decision striking down the final regulations expanding the ability for a group of unrelated employers to form an organization in order to offer health care to its members. The DOL’s statement setting forth policy positions regarding association health plans (AHPs) indicated its intent to fight the district court decision, and offered interim relief for those employers who have obtained health coverage from AHPs relying on the DOL’s final regulations. The DOL noted that the agency is committed to taking all appropriate action within its legal authority to minimize undue consequences on employees and their families. Thus, employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term. During this time, the DOL will not pursue enforcement actions involving AHP in reliance of the DOL’s final rules.




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ESOPs: What Not To Do (and If You Did, How to Correct It)

In a presentation for the National Center for Employee Ownership (NCEO) Conference, Emily Rickard presented on ESOP plan design, operation and administration. She, along with the other presenters, identified ERISA compliance watchdogs including the plaintiff’s bar, Department of Treasury and Department of Labor, and what attracts their attention when it comes to audits. Emily also identified common mistakes employers make during the entire ESOP lifecycle (e.g. lack of employee communication, distribution strategy and planning) and provided guidance on how to correct those mistakes.

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Court Puts Association Health Plans in Limbo

On March 28, a District of Columbia federal court agreed with a New York-led challenge by a group of 11 states and the District of Columbia and found that the Department of Labor’s (DOL) 2018 association health plan (AHP) rule (the Final Rule):

  1. Is contrary to the Employee Retirement Income Security Act of 1974 (ERISA)’s text and purpose; and
  2. Circumvents the protections and standards of the Affordable Care Act (ACA).

The decision, penned by Judge Bates, may act to deal a significant blow to the Trump administration’s attempt to expand coverage for small employers. Crafted in response to the October 12, 2017, executive order directing the DOL to promote the availability of AHPs, the Final Rule materially relaxed the standards for qualifying as an AHP under ERISA.

As further described here, the Final Rule sets forth the criteria pursuant to which a “bona fide group or association of employers” may establish a single-employer AHP under ERISA. Under the Final Rule, employers, associations and sole proprietors (referred to as “working owners”) can participate in AHPs provided certain arguably subjective requirements are satisfied. The states challenged the Final Rule, arguing that the DOL unreasonably expanded ERISA’s definition of employer. Applying the Chevron standard, the court agreed with the states to hold that the DOL unlawfully expanded ERISA’s definition of employer by failing to provide a “meaningful limit on the associations that would qualify as ‘bona fide’ ERISA ‘employers.’” The court vacated the bona fide association and working owner provisions of the Final Rule, but also provided some specific critiques and ordered the DOL to determine whether any part of the Final Rule can be salvaged; for now, the Final Rule is in limbo.

In a set of Questions and Answers issued April 2, 2019, the DOL noted that it disagrees with the court’s decision, and is considering all available options in consultation with the Department of Justice (DOJ). The DOJ has until May 28 to file a notice of appeal. The Trump administration could seek a stay of the order pending resolution of any appeal. Unless a court issues a stay, the regulations in effect prior to the Rule would be in effect. Stay tuned for further guidance and developments.




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Get Your Game On – How To Handle IRS and DOL Audits

During the Tax in the City event held in Dallas, Erin Turley and Allison Wilkerson gave an overview of benefit plan audits and the IRS examination process. They discussed various areas of focus, including, required minimum distributions, investment issues, benefit calculations and appropriate tax reporting. They provided attendees with best practices before an audit, as well as helpful resources from the IRS and DOL.

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