As part of the federal government’s response to the COVID-19 pandemic, the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA), and Pension Benefit Guaranty Corporation (PBGC) have recently provided relief to benefit plan sponsors by moving back certain upcoming plan compliance deadlines. See further below for a detailed list of the specific relief. IRS Notice 2020-23 provides that if any deadline would occur between April 1 and July 14, that deadline is automatically moved back until July 15, 2020, and this extension applies to a list of 44 employee benefit plan-related deadlines. The IRS notice triggered the PBGC’s disaster relief policy, which automatically extends certain PBGC deadlines that occur in the same April 1 to July 14 time period to July 15, 2020.
Additional relief was announced on April 28, in the form of a joint notice ( Joint Notice) issued by EBSA, IRS and the Treasury Department, which extended a number of deadlines for benefit plans and participants in accordance with CARES Act changes to ERISA Section 518. The Joint Notice’s relief applies to the “Outbreak Period,” the length of time beginning on March 1, 2020, and ending 60 days after the announcement that the COVID-19 National Emergency is over. On the same day, EBSA issued Disaster Relief Notice 2020-01 (Disaster Relief Notice). The Disaster Relief Notice clarified EBSA’s enforcement stance on certain fiduciary duties that plan sponsors have by extending deadlines. The Disaster Relief Notice also stated that the Outbreak Period extension, described in the Joint Notice, also applies to the distribution timelines for notices, disclosures, and other documents that Title I of ERISA requires plans to distribute to participants and beneficiaries. EBSA also released an FAQ which explains some of the relief provided by the Joint Notice and Disaster Relief Notice.
While these extensions provide plan sponsors with some relief for upcoming deadlines, there are noteworthy gaps in the relief. The most important of these is that the extension for filing the Annual Report Form 5500 only applies to a small group of benefit plans: plans whose plan years ended on September 30, October 31, or November 30, 2019, or whose plan year ended on June 30 or July 30, 2019, and who filed for an extension. For benefit plans that operate on a calendar year, there is no extension for filing the Form 5500, which remains due on July 31, 2020. A plan facing that July 31, 2020, deadline may file a Form 5558 to extend the Form 5500 filing deadline for an additional two-and-a-half months.
Joint EBSA-IRS-Treasury Relief
The Joint Notice provides extensions for administrative and procedural deadlines listed in the Joint Notice based on the end of the COVID-19 National Emergency. Any time during the Outbreak Period does not count when calculating the time limits listed in the Joint Notice. In practice, this means that if any of the time periods described below would normally begin during the Outbreak Period, they now begin once the Outbreak Period ends. Note that because the Outbreak Period ends 60 days after the announcement that the National Emergency is over, the earliest that the Outbreak Period can end is July. The following time periods are extended until the end of the Outbreak Period:
- The 30-day (or 60-day, if due to a loss of Medicaid or CHIP insurance coverage) period to request special enrollment in a benefit plan after a qualifying event. Qualifying events generally occur when a participant or beneficiary loses coverage in a health plan that previously covered them or when a participant or beneficiary is married or has a child.
- The 14-day period, after being notified that an individual has experienced a COBRA qualifying event, within which a health plan must provide COBRA election notices to the eligible individual.
- The 60-day period to elect COBRA continuation coverage after receiving the COBRA election notice or after a qualifying event occurs, whichever is later. COBRA qualifying events occur when a participant or beneficiary loses coverage in a health plan that previously covered them.
- The deadlines for paying COBRA coverage premiums. Normally, the initial premium payment is due 45 days after an individual elects COBRA continuation coverage and subsequent monthly payments must be paid within 30 days of the due date.
- The 60-day period for an employee or beneficiary to notify a plan of his or her divorce, when a dependent child is no longer a dependent, or when a beneficiary becomes disabled.
- The time period within which an individual may file a claim under the plan’s claims procedures. This time period can vary, because plans have flexibility in setting this length, provided that the time period to submit claims is reasonable.
- The time period within which an individual may file an appeal for an adverse benefit determination under the plan’s claims procedures. Health insurance and disability insurance plans must provide 180 days to file an appeal, and other plans must provide 60 days to file an appeal.
- The time period within which an individual may file a request for an external review after an adverse benefit determination or final adverse benefit determination. This timing can vary, based on whether a plan uses a state or federal external review process. The federal external review process requires that individuals have a period of time of at least four months in which they can file a request.
- The time period within which an individual may file information necessary to perfect a request for external review if the request was initially found to be incomplete. The timing here can vary as well, depending on whether the plan uses a state or federal process. The federal external review process requires that the plan give a claimant either the remainder of the four-month filing period or 48 hours, whichever is longer, to provide all necessary information.
The Department of Labor’s Disaster Relief Notice extends extensive relief by applying the Outbreak Period extension to the materials that ERISA requires plans provide to participants and beneficiaries. A plan’s failure to file or distribute required materials within the Outbreak Period will not violate ERISA, provided that the plan acts in good faith to distribute the materials. Good faith efforts include using electronic communication to provide information if the plan reasonably believes that participants have access to electronic communications. As examples of electronic communications, the Disaster Relief Notice lists email, text messages, and websites where the notices are continuously available. This Outbreak Period relief applies to a broad range of required notices and disclosures, including:
- Summary Plan Descriptions – which normally must be distributed to participants and beneficiaries within 90 days of becoming covered by a plan.
- Summaries of Material Modifications – which normally must be sent out no later than 210 days after the end of a plan year in which the plan is amended.
- Summary Annual Reports – which normally must be distributed within nine months after the end of a plan year.
- Annual Funding Notices – which normally must be sent within 120 days of the end of the plan year, which is April 30 for calendar year plans.
- Qualified Domestic Relations Order Notices – which normally must be sent promptly after receiving a domestic relations order.
- Notices of Adverse Benefit Determinations and Appeals – which normally must be distributed within a time period set in place by the plan’s terms.
- Blackout Notices – which normally must be distributed at least 30 days (but no more than 60 days) in advance of a temporary suspension of participants’ rights to direct investments. Furthermore, the rules on blackout notices normally require plan administrators to make a written determination that any notices provided with less than 30-days’ notice were delayed because of events beyond the plan’s control. The Disaster Relief Notice waives this written requirement.
- Mapping Notices – which must be provided during the same 30-days advance period (but no more than 60 days) that applies to Blackout Notices.
- QDIA Notices – which must be provided 30 days in advance of a participant’s initial eligibility or first QDIA investment, and again provided annually at least 30 days before the beginning of the plan year.
Participant Loan Guidance
The Disaster Relief Notice extends relief to retirement plans which allow participant loans in three ways.
- First, if a plan does not follow the plan’s loan procedures and statutory requirements for making plan loans, EBSA will not treat this as a violation if the failure is solely due to COVID-19. For this relief to apply, the plan administrator must make a good-faith effort to comply with loan requirements and the plan administrator must make a reasonable effort to correct any failures as soon as is administratively practicable. However, this relief is limited. It does not apply to Tax Code requirements for participant loans, such as the requirement for spousal consent.
- For the second element of loan-related relief, EBSA will not treat efforts to comply with new CARES Act loan provisions as failures. Specifically, a breach of fiduciary duty does not occur if a plan makes a loan at the increased CARES Act threshold of $100,000 or if the plan allows participants with loans to delay repaying loans.
- Third, if a plan is amended to include the CARES Act provisions for COVID-19-related loans and distributions, then EBSA will treat the plan as operating in accordance with those provisions before the adoption of any amendment including those terms provided that the plan is amended on or before the last day of the first plan year beginning on or after January 1, 2022, and that the amendment meets the conditions of the CARES Act. See this article for further discussion of the CARES Act’s impact on benefit plans.
Participant Contribution Guidance
The Disaster Relief Notice provides some relief from the requirement that plan sponsors have to quickly deposit participant contributions to a retirement plan. Normally, a plan sponsor must deposit amounts withheld from participant paychecks as soon as the amounts can be reasonably segregated from general assets, and never later than the 15th business day of the month following the month when the amounts were paid or withheld. In practice, EBSA’s position is that withholding amounts must usually be deposited in the plan a few days after they are withheld from paychecks. During the Outbreak Period, EBSA will not rule that employee contributions were deposited late if the delay is solely attributable to COVID-19. For this relief to apply, employers must still act reasonably, prudently, and in the best interests of employees—and must act to deposit employee contributions as soon as administratively practicable under the circumstances. Please note, however, this relief is limited because it does not apply to the excise tax imposed on late contributions. Any exemptions from the excise tax would have to be provided by the IRS, which has not yet issued any such relief.
EBSA concludes the Disaster Relief Notice by recognizing that COVID-19 may pose compliance problems in meeting deadlines and complying with all of ERISA’s requirements. In light of these potential difficulties, EBSA states that their current enforcement efforts will be focused on compliance assistance, grace periods, and further relief if it becomes necessary.
IRS Notice 2020-23 extends the deadlines for a list of 44 benefit plan deadlines contained in Revenue Procedure 2018-58. The deadlines cover many different aspects of plan operations, including filing deadlines, time limits that participants have to spend or receive money in the plan, and when corrective action must be taken. In addition to Notice 2020-23, the IRS has continuously updated an FAQs page that explains some of the filing extension relief. The following describes some of the important extensions:
- Filing Annual Report Form 5500, Form 8955-SSA and Form M-1 – This extension applies for forms that would be due between April 1 and July 14, 2020, and, as mentioned, only a select few benefit plans that do not operate on a calendar year are eligible for this extension. Form 8955-SSA is due at the same time as a plan’s Form 5500. EBSA’s Disaster Relief Notice applies the extension granted by Notice 2020-23 to Form M-1 as well. Form M-1 is an annual report that must be filed by multiple employer welfare arrangements (MEWAs). Forms M-1 are usually due on March 1 following any calendar year in which a filing is required, which would put this outside the scope of Notice 2020-23’s relief. However, MEWAs can request a 60-day filing extension. Such an extension would put the Form M-1 due date within the time frame for relief and would extend the filing deadline until July 15, 2020.
- Correcting ADP and ACP Testing Failures – As with the Form 5500 extension, this only applies to certain plans that do not operate on a calendar year. Failures must normally be corrected by the end of the next plan year by making corrective contributions, or by distributing excess contributions within two-and-a-half months after a plan year ends. Any such corrective deadline between April 1 and July 14 is delayed.
- Correcting Excess Deferrals – The normal deadline for refunding excess deferrals, over the 402(g) limit, is April 15, 2020, for all 2019 plan years. This deadline falls within the time period during which deadlines are extended, and so the deadline to correct excess deferrals has been delayed until July 15.
- Self-Correcting Operational Failures – The IRS allows plans to self-correct significant operational failures under the Employee Plans Compliance Resolutions System and thus avoid the time and expense of a corrective filing. The self-correction deadline is normally the end of the second plan year after the year when the failure occurred, and so Notice 2020-23 extends the self-correction deadline for operational failures that occurred in plan years beginning May 1, June 1, and July 1, 2017.
- Depositing Rollover Distributions – Participants have 60 days to deposit a rollover distribution into an eligible retirement plan, including an IRA. Any deposit deadlines occurring between April 1 and July 14 are delayed.
- Cafeteria Plan Elections – Participants in a Section 125 Cafeteria Plan may pay for insurance premiums and make contributions to flexible spending accounts and health savings accounts, if available, on a pre-tax basis. The decision to pay for these benefits must be made before the beginning of the plan year. For any cafeteria plans with a plan year beginning between April 1 and July 14, the election period is extended until July 15, 2020.
- Using Flexible Spending Account Funds – Participants usually have until the end of the plan year, or until the end of any applicable grace period, to spend money that can be reimbursed from a flexible spending account or the money must be forfeited. If the plan year or grace period ends between April 1 and July 14, then the participants have additional time, until July 15, 2020, to incur expenses that can be reimbursed.
- Filing Form 5498-SA – This is a form dealing with a participant’s Health Savings Account. Normally, it must be filed with the IRS by May 31 and an account statement must be given to the participant. This deadline is extended until July 15, 2020.
- Repaying Plan Loans – Participant loans made out under a retirement plan are usually required to be repaid within five years. Any loan payment due between April 1 and July 14 is delayed until July 15, 2020. This relief for loan repayment is in addition to the CARES Act loan provisions, which allow plans to suspend loan repayments due between March 27, 2020, and December 31, 2020, for up to one year.
The PBGC automatically applies IRS disaster-related extensions to many of the defined-benefit plan filings it requires. Plan sponsors must notify the PBGC that they are eligible for the filing extension on or before the final day of the extension period. Plan sponsors should contact the PBGC via email at the email address provided on the form for which they are eligible for a filing extension. The email should contain the following information: the number of the applicable IRS news release announcing the disaster relief; the plan name, EIN and plan number; and the name and address of the person affected by the disaster, such as the plan sponsor. For PBGC premiums, the notification of the relief should be included in the Comprehensive Premium Filing and plan sponsors are advised to also email the PBGC at firstname.lastname@example.org to provide notification. The PBGC’s extensions apply to the following filings:
- Comprehensive Premium Filings and the Payment of Premiums – Comprehensive Premium Filings are due on the 15th day of the 10th month following the end of a plan year. Any filings due in April, May and June are delayed until July 15, 2020.
- ERISA 4010 Filings for Underfunded Plans – Underfunded plans must report financial and actuarial information to the PBGC on or before the 105th day following the end of the plan’s year. For plans that operate on a calendar year, the deadline for these filings is normally April 14. The PBGC’s policy extends that deadline until July 15, 2020.
- Reportable Event Notices – The PBGC extension applies if the notice must be filed between April 1 and July 14. However, the PBGC excludes certain reportable event notices from the extension because these filings disclose important, high-risk events for pension plans. Plan sponsors may request individual extensions for these filings, however. The PBGC deadline extension relief does not apply to the following filings:
- Form 10-Advance, used for advance notice of reportable events.
- Form 200, the notice of missed contributions.
- Form 10, which provides post-event notice, for the following events:
- Failure to make required contributions under $1 million.
- Inability to pay benefits when due.
- Loan default.
- Actions related to distress terminations for which the PBGC has issued a distribution notice.
If you have any questions about these extended benefit plan deadlines, please contact one our employee benefits attorneys.