COVID-19 Ate My Homework – Recent Extensions and Relief for Retirement Plans

SUMMARY

The Department of Labor (DOL), in conjunction with the Internal Revenue Service (IRS) and Department of the Treasury, recently issued guidance extending a number of retirement plan deadlines in light of the COVID-19 pandemic, including deadlines for many participant notices and benefit plan claims. However, the new guidance does not extend the 2019 Form 5500 for a calendar-year retirement plan. The guidance also provides fiduciary relief for retirement plans in the areas of electronic disclosures and plan loans, distributions and contributions. Finally, the guidance includes relief applicable to group health plans, which is described here. Plan sponsors, administrators and fiduciaries should be aware of these extensions and other relief as they continue to navigate the impact of the COVID-19 pandemic on their retirement plans.

IN DEPTH

In recognition of the difficulties faced by retirement plan sponsors, participants and beneficiaries due to the COVID-19 pandemic, new guidance extends the deadlines for notices and disclosures required by Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and extends deadlines for plan participants and beneficiaries to submit benefit claims and benefit appeals. The new guidance also provides some welcome fiduciary relief for electronic disclosures, incomplete plan loan or distribution documentation, and delayed participant contributions and loan repayments.

Extension of Certain Disclosures and Notices

The new guidance provides relief to retirement plan administrators for deadlines to furnish ERISA-mandated statements, disclosures and notices beginning on March 1, 2020, and ending 60 days after the announcement of the end of the national emergency (the COVID Period). Specifically, during this COVID Period, required notices may be delayed, provided that the fiduciary acts in good faith and furnishes the communication as soon as practical. Some of the extended notices and disclosures include: annual funding notices, blackout notices, summary annual reports, summary plan descriptions, qualified default investment alternative notices and other notices or disclosures required under Title I of ERISA.

Limited Extension for Form 5500 Filings

Retirement plans subject to ERISA generally must file a Form 5500 by the end of the seventh month after the end of the plan year (for calendar-year plans, the deadline is July 31 of the following year). Guidance previously extended any Form 5500 filing that would otherwise be due between April 1 and July 15, 2020, to a new deadline of July 15, 2020, without the need to request an extension. However, for a calendar-year plan, the 2019 Form 5500 still is due by July 31, 2020, but may be extended using IRS Form 5558 until October 15, 2020.

Expansion of Permitted Electronic Disclosure

The guidance also allows use of alternative electronic means for communicating with retirement plan participants and beneficiaries during the COVID Period, if the fiduciary reasonably believes such individuals have effective access to email, text messaging or the plan sponsor’s intranet or website. The DOL historically resisted allowing plan sponsors to use electronic disclosures, but the expansion of electronic communication during the COVID Period closely follows a proposed DOL regulation to relax electronic disclosure of retirement plan notices and required information. See our summary of the proposed rule here.

Fiduciary Relief for Loans, Distributions and Contributions

The guidance contains relief for plan fiduciaries in connection with retirement plan loans and distributions. Failure to follow procedural requirements for plan loans or distributions will not violate ERISA if:

• The failure is solely attributable to the COVID-19 pandemic;

• The plan administrator makes a good-faith effort to comply with the procedural requirements and

• The plan administrator makes a reasonable attempt to correct any procedural deficiencies, such as assembling missing documentation, as soon as administratively practical.

This relief does not apply to any other requirements under the IRS’s jurisdiction, such as a failure to comply with spousal consent requirements for a retirement plan loan or distribution.

Additional fiduciary relief is granted for participant contributions and loan repayments to retirement plans. Under ERISA, such contributions and repayments generally must be made no later than 15 business days following the month in which the amounts were withheld from payroll (but the DOL generally takes the position that such amounts must be forwarded to a retirement plan’s trust within a few days of payroll). Recognizing that employers and plan service providers may experience difficulties forwarding payments within this timeframe, the DOL provided that it will not take enforcement action with respect to a temporary delay in contributions or repayments to a retirement plan, provided the delay is solely because of the COVID-19 pandemic, occurs during the COVID Period and the plan sponsor forwards such payments as soon as administratively practical.

Extended Benefit Claims and Appeal Timetables

ERISA prescribes certain timeframes during which plan participants or beneficiaries must file benefit claims and appeals, and timeframes during which plan fiduciaries must decide such claims and appeals. The new guidance extends the time for retirement plan participants and beneficiaries to file benefit claims, or file appeals of denied benefit claims. Specifically, retirement plans must disregard the COVID Period in determining the dates by which participants and beneficiaries are required to make benefit claims or benefit appeals. For example, although a plan participant normally must appeal a denied retirement plan claim within 60 days, the deadline for such appeal is extended until the end of the COVID Period. Even though the guidance does not specifically address a fiduciary extension of the period to decide a benefit claim or appeal, notification of such decisions also are likely extended (as a required Title I notice under ERISA).

Conclusion

The recent guidance reflects an acknowledgement that retirement plan sponsors, administrators and participants may be struggling to comply with applicable deadlines and requirements for retirement plans in the midst of the COVID-19 pandemic. Plan sponsors and administrators should consider all available extensions and relief as they continue to administer retirement benefits during 2020.