Benefits Bryan Cave

Benefits BCLP

Other Posts

Main Content

COVID-19: Considerations for U.S. Contributing Employers to Multiemployer Plans

The COVID-19 pandemic has had a significant financial impact on business and individuals around the globe, with global financial markets seeing significant drawbacks in March 2020 alone.  That impact has also been felt by U.S. employers who contribute to multiemployer pension plans, as well as the plans themselves.  Below are a few issues that U.S. contributing employers to multiemployer pension plans should keep in mind in these volatile times:

  1. Consequences of Changes in Funded Status. Even before the COVID-19 pandemic, many multiemployer pension plans were operating in critical or critical and declining funded status, and the market fluctuations as a result of the COVID-19 pandemic will only exacerbate those funding shortfalls.  Contributing employers should anticipate that those shortfalls may result in additional surcharges becoming payable on their monthly contributions (as a result of the Pension Protection Act of 2006) as well as increased estimates of potential withdrawal liability.
  2. Withdrawal Liability. With many contributing employers implementing layoffs or other workforce reductions, there may be questions as to whether such reductions may result in withdrawal liability under the applicable multiemployer pension plan.  Withdrawal liability is due upon a complete or partial withdrawal from a multiemployer pension plan.  A complete withdrawal occurs when a contributing employer permanently ceases all operations covered by the plan or no longer has an obligation to contribute under the plan.  Therefore, layoffs and/or temporary shutdowns should not trigger complete withdrawals unless and until those layoffs and shutdowns become permanent.  Partial withdrawal occurs upon a 70% contribution decline

CARES Act Expands U.S. Retirement Plan Access and Provides Additional Relief and Changes to Employer-Provided Benefits

The Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) provides legislative relief to participants impacted by the Coronavirus pandemic.  A summary of key provisions of the CARES Act, based on the current draft, is included below. These provisions are, of course, still subject to approval by both houses of Congress and the President’s signature.

Provisions Applicable to Retirement Plans

Coronavirus-Related Distributions

Tax-favored coronavirus-related distributions (“CRD’s) which do not exceed $100,000 will not be subject to the 10% early distribution tax.  A CRD means any distribution from a plan made on or after January 1, 2020 and before December 31, 2020 to an individual who is one of the following:

  • An individual who is diagnosed with COVID-19 or SARS-CoV-2;
  • An individual whose spouse or dependent is diagnosed with COVID-19 or SARS-CoV-2; or
  • An individual who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, experiencing a reduction of work hours, inability to work due to lack of child care caused by COVID-19 or SARS-CoV-2, the closing or reduction of hours by a business owned or operated by such participant due to COVID-19 or SARS-CoV-2, or other factors determined by the Treasury Secretary.

Notably, the plan administrator may rely on the individual’s certification that he/she has experienced a CRD.  Tax on the CRD shall, unless the individual elects to the contrary, be spread pro-rata over a three year period.  The individual may repay the CRD to the plan without regard to contribution

COVID-19 U.S.: Collected Employee Benefits Blog Posts

We have published a number of COVID-19/coronavirus related blog posts for our U.S. clients and friends over the past couple of weeks.  In an effort to consolidate the flurry of guidance and keep you up-to-date in these fast-changing circumstances, we are posting the links to all of our COVID-19 related blog posts here.  We will update the list below as additional blog posts are added.

  • IRS relief for high deductible health plans covering testing and treatment: click here
  • ERISA fiduciary responsibilities in an uncertain market: click here
  • HIPAA compliance during the COVID-19 pandemic: click here
  • Aggregated links to federal government guidance: click here
  • Compensation considerations fr public and private U.S. companies: click here
  • Emergency paid sick leave and family leave under the Families First Coronavirus Response Act (FFCRA): click here and here
  • Proposed legislative relief for participant access to retirement plan funds under the Coronavirus, Aid, Relief and Economic Security Act (CARES Act): click here
  • FFCRA paid sick and family leave tax credits for small employers: click here
  • FFCRA COVID-19 diagnostic testing mandate for most group health plans: click here
  • Providing employee assistance through interest-free loans: click here
  • Summary of the CARES Act retirement plan access and employer-sponsored health plan provisions: click here.
  • Key Issues for employers

Families First Coronavirus Response Act Part 2 of 2: Impact on Employer Health Plans

The Families First Coronavirus Response Act (“FFCRA”) enacted March 18 provides a combination of benefits to help U.S. employees during the COVID-19 pandemic:

  • Mandated benefits under employer health plans,
  • Paid sick leave benefits (up to 80 hours) – click here for our discussion of the paid sick leave benefits,
  • FMLA benefits (up to 12 weeks with a combination of paid and unpaid leave) – click here for our discussion of the FMLA benefits,
  • Tax benefits to ease the cost to certain small employers of providing health care coverage under the newly expanded sick leave and FMLA benefits noted above click here for a discussion of the FMLA benefits – click here for our discussion of the small employer tax credits.

The following is a summary of the mandated benefits COVID-19 testing requirements applicable to employer health plans.

COVID-19 Diagnostic Testing Coverage Requirements

Most group health plans[1] and group insurance coverage are required to cover COVID-19 testing related items and services without imposing any cost sharing (including deductibles, copayments, and coinsurance) or prior authorization or medical management requirements. The following is a summary of the key points of the FFCRA requirement:

  1. Coverage of Diagnostic Items and Services without Cost-Sharing. The specific items and services to which the coverage mandate applies include:
    1. “In vitro diagnostic products”[2] used for the detection of SARS–CoV–2 or diagnosis of the virus that causes COVID–19

Families First Coronavirus Response Act Part 1 of 2: Small Employer Tax Credits

The Families First Coronavirus Response Act (“FFCRA“) generally requires U.S. employers with fewer than 500 employees (“Small Employers”) to provide paid sick leave and additional FMLA benefits to their employees.[1] You can read our summary of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act here and here, respectively.

In order to offset some of the costs these provisions impose on Small Employers, the FFCRA also provides a quarterly payroll tax credit equal to 100% of the qualified sick and leave wages paid to employees under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.

The amount of leave wages taken into account is limited with respect to each individual employee for purposes of the credit.

  • For sick leave wages paid due to an employee’s illness or quarantine, the amount of wages taken into account for purposes of the credit is capped at $511 per day and $5,110 in the aggregate for each employee; and
  • For sick leave wages paid due to an employee’s need to care for others or care for the employee’s child(ren) due to school closures[2], the amount of wages taken into account for purposes of the credit is capped is $200 per day and $2,000 in the aggregate for each employee. Sick leave wages under the FFCRA are available for a maximum of 2 weeks (10 days).

CARES Act Would Expand U.S. Retirement Plan Access to Participants Impacted by the Coronavirus Pandemic

The proposed Coronavirus, Aid, Relief and Economic Security Act (“CARES ACT”) would, if enacted, provide legislative relief to participants impacted by the Coronavirus pandemic.  This relief is expected to be agreed upon and enacted – although likely with some modifications.  We will update this post and provide additional detail at that time.

As currently drafted, the CARES ACT would provide the following relief with respect to hardship distributions and loans.

Hardship Distributions

The 10% early distribution tax would be waived for the following virus related hardships:

  • Participant is diagnosed with COVID-19;
  • Participant’s spouse or dependent is diagnosed with COVID-19;
  • Participant experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, experiencing a reduction of work hours, inability to work due to lack of child care caused by COVID-19, the closing or reduction of hours by a business owned or operated by such participant due to COVID-19; or
  • Other circumstances as determined by the Treasury Secretary.

The CARES Act would provide additional tax relief in the form of a three-year period for (i) payment of tax on the distribution and (ii) tax-free repayment of the distribution to the plan.

Plan Loans

The maximum loan that could be taken would be increased to the lesser of $100,000 or 100% of a participant’s vested account balance.  This limit would be double the current limit of the lesser of $50,000 or 50% of a participant’s vested account balance.  In addition, qualifying participants with outstanding loan

Guidance on Employee Benefits and the Coronavirus (COVID-19)

As the Coronavirus has continued to spread, there has been guidance from various entities on a myriad of topics pertaining to employee benefits. Summaries and links to such guidance can be found below. This information will be updated regularly as more guidance becomes available.

The Health Insurance Portability and Accountability Act (HIPAA): The Office for Civil Rights, a division of the U.S. Department of Health and Human Services, published a bulletin outlining privacy of protected health information and when covered entities may disclose such information without a patient’s authorization. Covered entities may be able to disclose needed protected health information without individual authorization to public health authorities, to persons at risk of contracting or spreading a disease, or to prevent a serious and imminent threat, among other limited circumstances. Covered entities must make reasonable efforts to limit the information disclosed to that which is the minimum necessary to accomplish the purpose. In a prior post, we provided a review of the bulletin and ongoing HIPAA obligations for covered entities.

The Family and Medical Leave Act (FMLA): The U.S. Department of Labor released a Q&A addressing various questions about employee rights and employer responsibilities under the FMLA. Eligible employees are typically entitled to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month period due to their own illness or that of a family member. Covered employers must continue to abide by federal FMLA laws as well

Fiduciary Responsibilities under ERISA in an Uncertain Market

If you are an ERISA fiduciary charged with management or investment of plan assets, and recent market activity has not tripped any alarm bells — or, if the alarm bells have been tripped, but you are are looking for a bit of guidance on how to respond, then keep reading.  Due to a combination of recent factors, including the spread of the Coronavirus (COVID-19), the stock market suffered its worst drop in over 30 years this past week. Moreover, the market outlook will likely continue to be uncertain for the near future as businesses around the world adjust and take action in response to the COVID-19 outbreak and many consumers are quarantined in their homes.

In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action. As a reminder, those duties under Sections 404 and 406 of ERISA include:

  • The duty to act prudently;
  • The duty to diversify assets of the plan;
  • The duty to comply with provisions of the plan;
  • The duty of loyalty;
  • The duty to pay only reasonable plan expenses; and
  • The duty to avoid prohibited transactions.

The first three of these are particularly relevant when the market is uncertain.

  • The duty to act prudently: It is important to remember that this duty requires the fiduciary to act with the care, skill, prudence, and diligence that a prudent person acting in

IRS Expands Determination Letter Program for Mergers of Qualified Plans Following Corporate Transactions

The IRS recently reversed course on the availability of the determination letter program for merged qualified retirement plans – thereby providing new alternatives for integrating qualified retirement plan benefits in the context of corporate transactions.

Merged Plan Relief:  Rev. Proc. 2019-20, released on May 1, 2019, expands the IRS’ determination letter program for individually designed qualified retirement plans (e.g., defined benefit plans or defined contribution plans) that result from a merger of two or more qualified retirement plans following a corporate merger, acquisition or other similar business transaction (a “Merged Plan”).  The newly expanded program will be available beginning September 1, 2019 and continuing on an ongoing basis.

Eligibility:  To be eligible for the determination letter program:

  • The Merged Plan must be a combination of two or more qualified retirement plans maintained by previously unrelated entities (i.e., entities that are not members of the same controlled group under Section 414 of the Internal Revenue Code);
  • The plan merger must occur no later than the last day of the first plan year that begins after the effective date of the corporate merger, acquisition or other similar business transaction (the “Corporate Transaction”); and
  • A determination letter application for the Merged Plan must be submitted by the last day of the first plan year that begins after the effective date of the plan merger.

Pre-approved or prototype qualified retirement plans are not explicitly covered by the procedure  — additional IRS guidance will be needed to determine the applicability

Glass Lewis Updates Proxy Voting Guidelines for 2019

Glass Lewis Updates Proxy Voting Guidelines for 2019

November 30, 2018

Authored by: Denise Erwin and Lisa Van Fleet

On October 24th, Glass Lewis published its updated proxy voting guidelines for 2019.  Some key compensation-related changes for reporting companies to keep in mind are highlighted below:

Excise Tax Gross-ups

When any new excise tax gross-ups are provided for in executive employment agreements, Glass Lewis may recommend against members of the compensation committee, particularly where a company previously committed not to provide gross-ups in the future.  Glass Lewis is particularly opposed to gross-ups related to excise taxes on excess parachute payments.  New gross-up provisions with respect to these excise taxes may lead to negative recommendations for a company’s say-on-pay proposal.

Contractual Payments and Arrangements

The new guidelines clarify the terms that may contribute to a negative voting recommendation on say-on-pay proposals.  When evaluating sign-on and severance arrangements, Glass Lewis will consider the size and design of any payments as well as U.S. market practice.  Glass Lewis will consider the executive’s regular target compensation level, the sums paid to other executives and, in special cases, whether the sums paid to departing executives were appropriate given the circumstances of the executive’s departure.  Excessive sign-on awards and multi-year guaranteed bonuses may result in negative recommendations.   In addition, key man clauses, board continuity conditions and excessively broad change in control triggers are also terms that could result in a negative recommendation.

Executive Compensation Disclosure for Smaller Reporting Companies

When assessing the performance of compensation committees, Glass Lewis indicates that it will consider the impact of materially decreased CD&A disclosure for smaller reporting companies when

The attorneys of Bryan Cave Leighton Paisner make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.