These Boots Are Made For Walking…But If You Quit, You Might Not Get the COBRA Subsidy

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by Brenda Berg

April 8 UPDATE: The COBRA subsidy model notices referenced in this article are now available: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy. Employers should be working with their COBRA administrator on how to notify eligible individuals about the subsidy.

The COBRA subsidy from the most recent COVID-19 stimulus bill – The American Rescue Plan Act of 2021 (ARPA) – is now in effect. An assistance-eligible individual can have 100% of COBRA premiums subsidized for the periods beginning April 1, 2021 through September 30, 2021. All plan sponsors must offer the subsidy – it is not optional.

Eligible former employees and spouses/dependents (qualified beneficiaries) can receive the subsidy if they are already on COBRA. In addition, individuals who declined or dropped COBRA coverage can elect into COBRA under a “second bite at the apple” election process, if they are still in the remaining period of COBRA coverage that would have applied originally. Read more

Whoomp There It Is…The IRS Issues Further Flexible Spending Account Relief under Notice 2021-15

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By Benjamin Gibbons

Earlier this year, Bret Busacker explained the FSA relief enacted as part of the Consolidated Appropriations Act, 2021 (CAA) in a blog post titled “Bridge Over Troubled Water: 2021 Flexible Spending Account Relief in the Consolidated Appropriations Act, 2021.”  The FSA relief in the CAA essentially permits employers to eliminate the “use it or lose it rule” for 2020 and 2021 and to permit mid-year FSA changes to both health FSAs and dependent care FSAs.  The IRS recently issued additional guidance with respect to these FSA relief provisions in IRS Notice 2021-15 (the “Notice”). Read more

Should Auld Acquaintance Be Forgot…Not If They Relate to the Affordable Care Act Reporting Requirements

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by Becky Achten

Should auld acquaintance be forgot…not if they relate to the Affordable Care Act reporting requirements. In the midst of the flurry of health and welfare changes coming from the Consolidated Appropriations Act, employers can’t forget about the “auld” Affordable Care Act. Since the 2015 tax year, large employers of self-insured health plans have been required to report to employees and the IRS information regarding the health insurance offered. Form 1095-C is used to report this information to employees. There have been a few changes to the Form 1095-C for the 2020 tax year that employers should keep in mind: Read more

I Would Walk 500 Miles … But Thankfully I Don’t Have To Since the IRS Will Still Permit E-Signature

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by Beth Nedrow

The Covid-19 pandemic has created numerous challenges for retirement plan administrators. One such challenge is how to comply with the requirement to obtain a participant’s written signature to get a distribution from a qualified plan. In plans subject to the QJSA rules, the participant must sign in the presence of a notary or a plan representative. The plain language of the IRS regulation – requiring physical presence – would preclude the use of remote notarization. In June 2020, the IRS issued Notice 2020-42 that provided temporary relief from the physical presence requirement. In December, the IRS extended that relief through June 30, 2021 in Notice 2021-3. Read more

The Maximum QACA Automatic Increase Percentage is Movin’ on Up

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A Brief Summary of Recently Issued IRS Safe Harbor 401(k) Plan Guidance

By Benjamin Gibbons

For those of you who have been following along at home (literally these days), you know that the SECURE Act, which was passed only at the end of last year (though it feels like forever ago), instituted a wide range of retirement plan changes, including a number of changes with respect to safe harbor 401(k) plans. On December 9, 2020, the IRS issued guidance on these safe harbor changes in the form of Notice 2020-86.

More specifically, the SECURE Act (in part): (1) increased the maximum automatic contribution percentage for qualified automatic contribution arrangement (QACA) safe harbor 401(k) plans from 10% to 15%; (2) provided plan sponsors the ability to implement a retroactive safe harbor nonelective contribution during a plan year (generally provided the plan is amended at least 30 days before the end of the plan year); and (3) eliminated the safe harbor notice requirement for most plans with safe harbor nonelective contributions. The Notice, in Q&A format, provides additional guidance on each of these SECURE Act changes. A brief summary of the key provisions of the Notice follows. Read more

FAME! I’m Gonna Live Forever….and My Retirement Account Might Last That Long, Too!

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by Becky Achten

Section 401(a)(9) requires most retirement plans and individual retirement accounts to make required minimum distributions (“RMDs”) over the lifetime of the individual (or the lifetime of the individual and certain designated beneficiaries) beginning no later than such individual’s required beginning date (generally, April 1 in the year following attainment of age 72).  This minimum amount is determined by dividing the individual’s account balance by the applicable distribution period found in one of the life expectancy and distribution tables (the “Tables”).

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Your [es]Cheating Heart … Might Be Useful to Retirement Plans Dealing With Missing Participants

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by Beth Nedrow

Retirement plan administrators have for years sung the sad lament of what to do with missing participants. Ol’ Hank Williams himself could have written a hit song about the problem. Recent guidance from the IRS may have the retirement community singing a slightly different tune, however.

The hassle of keeping plan accounts open for lost or deceased former employees can be a real problem, especially for terminating plans. When participants go missing, retirement plan administrators have few alternatives. One alternative that has been discussed is the use of state unclaimed property funds (sometimes called by their old-fashioned name, “escheat” law). Plans previously were reluctant to escheat unclaimed retirement accounts to state funds due to concerns over how to report tax and withholding. But recent guidance from the IRS (Revenue Ruling 2020-24) makes clear that if a plan escheats funds to the state, it is appropriate for the plan to treat the payment as being includible in gross income and subject to federal income tax withholding, reportable on a Form 1099-R.

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I’m Just Waiting on an… End to the Extended ERISA Deadline Periods

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by Brenda Berg

Early in the pandemic, the IRS and DOL issued a temporary rule (published May 4, 2020) extending certain deadlines applicable to retirement plans and health and welfare plans. (See Deadlines and Commitments: DOL and IRS Temporary Rule for COVID for more information about that extension.) Under that temporary rule, the deadlines were generally extended until 60 days after the announced end of the National Emergency due to COVID-19, which was referred to as the “Outbreak Period.” The deadlines are essentially “tolled” during the Outbreak Period. The National Emergency began on March 1, 2020, as declared by President Trump’s Proclamation.

The examples in the temporary rule assumed an end date of April 30, 2020 for the National Emergency, which would have extended the Outbreak Period through June 29, 2020. As we all now know, this National Emergency did not end on April 30, and in fact it is still in place. So we are still waiting for the National Emergency period to end and trigger the normal deadlines.

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Don’t You . . . Forget About Special Tax Notices

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by Leslie Thomson

The Internal Revenue Code requires plan administrators of qualified retirement plans (e.g., 401(k) plans, defined benefit plans and ESOPs), 403(b) plans, and eligible 457(b) plans maintained by a governmental employer to provide a written explanation to any recipient of an eligible rollover distribution. This notice is typically referred to as the Special Tax Notice.

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Call to the Post…Cycle 3 Restatement Considerations

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by Becky Achten

Just as the Kentucky Derby will finally be run this Saturday, the race for plan restatements has also begun….although this race will last longer than “the most exciting two minutes in sports.”

Pre-approved plans – plan documents the have already been submitted for review to and been issued an opinion letter from the IRS – are required to be updated and restated every six years. The IRS announced that the current restatement period (referred to as Cycle 3) would begin on August 1, 2020 and end on July 31, 2022. During that period, all pre-approved defined contribution plans, including 401(k), profit sharing and money purchase plans, must be restated in order to maintain their qualified status. And, for the first time, ESOP and KSOP pre-approved plan documents will be available from many document providers. Once the IRS has issued the opinion letters, document providers will be reaching out to plan sponsors to start the restatement process.

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