ERISA | Fraser Blog

Five Stories That Matter in Michigan This Week – May 5, 2023

Sixth Circuit: Employee Must Alert Employer of Need for Reasonable Accommodation to Bring a Claim of Disability Discrimination

In the case of Hrdlicka v. General Motors, the Sixth Circuit Court of Appeals upheld a lower court ruling that an employee must sufficiently inform their employer of their need for a reasonable accommodation in order to prosecute a claim of disability discrimination under state and federal law.

Why it Matters: This case serves as an important reminder that while employers must be responsive and engaged when an employee requests a reasonable accommodation for a disability, there is also a responsibility for employees to inform their employers of a disability. In this case, the plaintiff’s “purported disability was unknown to either herself or General Motors until well after her employment was terminated.”

———

Independent Contractor Bills Introduced in Michigan House of Representatives

Even though the Michigan Legislature is currently mired in the often months-long process of passing a budget, there is a package of mostly non-spending bills in the Michigan House of Representatives that businesses should be keeping an eye on.

Why it Matters: The multi-bill package (HB 4390 et seq.) would create one of the strictest standards for defining an independent contractor and provides for significant penalties for those employers that misclassify workers. Learn more.

———

Limitations of Federal Bankruptcy Law for Marijuana Businesses

Under the federal Controlled Substances Act, marijuana remains classified as a Schedule I drug, making it illegal at the federal level. This creates a unique challenge for marijuana businesses operating legally within their state’s framework, as they are unable to avail themselves of federal bankruptcy protection.

Why it Matters: Federal bankruptcy courts have been reluctant to provide relief to debtors engaged in activities that are illegal under federal law, even if those activities are legal under state law. As a result, marijuana businesses are often left without the benefits of bankruptcy protection, such as the automatic stay, discharge of debts, and court-supervised reorganization.

———

Attorney Receives Favorable Ruling for Firm Client

Fraser Trebilcock’s Litigation Department Chair Thaddeus Morgan obtained a favorable ruling for the firm’s ERISA plan client in a case brought by a no-fault provider claiming reimbursement for the plan enrollee’s treatment.

Why it Matters: The court granted the plan’s motion to dismiss finding that the provider did not have standing and the plan’s anti-assignment provision was enforceable. Learn more.

———

Ten Reasons You May Want to Consider a Family Cottage Succession Plan

The goal of cottage succession planning is to set up legal ground rules that provide the best chance to keep a cottage in the family for future generations.

Why it Matters: A cottage plan usually addresses concerns through the creative use of a limited liability company (LLC), or in some cases a trust, to own the property. Here are ten reasons why you and/or your family may want to consider a family cottage succession plan. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Five Stories that Matter in Michigan This Week – February 24, 2023

$35 Million in Grants Available for Small Nonprofits

The State of Michigan, Department of Labor and Economic Opportunity (LEO) and Michigan Nonprofit Association (MNA) have teamed up to help Michigan charities whose operations were impacted by the COVID-19 pandemic.

Why it Matters: Under this initiative, called the MI Nonprofit Relief Fund, grants in amounts between $5,000 and $25,000 will be awarded to selected entities with annual revenues total under $1 million. In addition, eligible entities must be based in Michigan and recognized by the IRS under Section 501(c)(3). Learn more.

———

Michigan Cannabis Regulatory Agency Suspends Licenses, Issues Advisory

The Michigan Cannabis Regulatory Agency (CRA) recently suspended the licenses of a marijuana processor and issued a safety advisory for items manufactured with “illicit product.”

Why it Matters: This action is an important reminder to marijuana businesses in Michigan that the CRA is active in regulating businesses and taking enforcement action when appropriate. TAS Asset Holdings is the second processor to have its license suspended by the CRA this month. The CRA also announced disciplinary action against 10 marijuana businesses on February 10.

———

CRA Publishes January 2023 Data, Average Price Drops

Per recent monthly data published by the Cannabis Regulatory Agency, the average retail flower price of an ounce of cannabis is $80.16, an all-time low, and almost a 50% decrease compared to last year’s average price of $152.74.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices. Contact our cannabis law attorneys if you have any questions.

———

DOL Issues Telework Guidance to Employers

On February 9, 2023, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin (Bulletin) addressing several questions related to compliance with the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) when a business employs teleworkers.

Why it Matters: The Bulletin provides that the protections under the FLSA apply equally to employees who telework as to employees working at an office, factory, construction site, retail outlet, or any other worksite location.

———

ERISA Health and Welfare Plan Voluntary Audit Service

Fraser Trebilcock is excited to introduce our Health and Welfare Plan Voluntary Audit Service to help businesses ensure their health and welfare plans are compliant with the Employee Retirement Income Security Act (ERISA).

Why it Matters: ERISA is a complex set of regulations that governs employee benefit plans, including health and welfare plans. Failure to comply with ERISA can result in costly fines and penalties, not to mention damage to your company’s reputation. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Labor, Employment & Civil Rights | Aaron Davis
Employee Benefits | Robert Burgee

Five Stories that Matter in Michigan This Week – November 25, 2022

U.S. Supreme Court Declines Challenge to 2018 Seattle Hotel Health Insurance Law

The U.S. Supreme Court on Monday, November 14, 2022, turned away a challenge to a 2018 Seattle law requiring hotels to pay for health insurance for low-wage workers.

Why it Matters: The justices declined to hear an appeal by a group called the ERISA Industry Committee (ERIC) of a lower court’s ruling that upheld the law. The U.S. Supreme Court’s decision not to take up the challenge could encourage other cities and states to adopt similar requirements intended to address the widespread lack of health insurance among low-wage employees. (as reported by Reuters on November 21, 2022.)

———

EEOC Issues New Workplace “Know Your Rights” Poster

The Equal Employment Opportunity Commission has issued an updated “Know Your Rights” workplace poster. Employers with more than 15 workers are required to display the poster, which can be found here, in their workplace. The updated poster identifies and summarizes laws that protect workers from discrimination and retaliation, and explains how employees or applicants can file a complaint if they believe that they have experienced discrimination.

Why it Matters: Employment law is a constantly evolving area, so it’s important for employers to stay abreast of new developments, such as this updated poster requirement from the EEOC. Contact a member of our Labor, Employment & Civil Rights team with any questions.

———

Business Planning for the Future

A lot of small-to-medium size businesses devote time and focus on their near-term future but may not think of what 5-10 years will bring. The value of a business can often be in the ability to transition it to a new owner, but some business owners are unsure how to set themselves up to be successful in this arena.

Why it Matters: Capitalizing on the ability to plan for the long-term will aid your business in any transitions that may occur. Learn more here.

———

FTC Safeguards Rule Deadline Extended, But Don’t Wait to Implement Data Security Compliance Protocols

The Federal Trade Commission recently extended the deadline, from December 9, 2022, to June 9, 2023, for compliance with the most stringent requirements of its latest rulemaking, revisions to the Safeguards Rule under the Gramm Leach Bliley Act (“the GLBA”).

Why it Matters: The GLBA, which was implemented over 20 years ago, defines how businesses gather, use, and share certain financial information about their customers. The Safeguards Rule establishes certain data security requirements for how a business stores that information. Learn more from our Fraser Trebilcock attorneys on the matter.

———

Sixth Circuit Rules that Notice is Required to Terminate Contract for Successive Performances

Under Section 440.2309(2) of Michigan’s Uniform Commercial Code, a contract that “provides for successive performances but is indefinite in duration” may be terminated at any time (without cause). However, as a U.S. Court of Appeals for the Sixth Circuit decision points out, reasonable notice of such termination must be provided, unless the requirement of notice is waived via the contract.

Why it Matters: The court’s ruling in the case of Stackpole International Engineered Products v. Angstrom Automotive Group is a reminder for buyers and sellers, especially in the manufacturing industry, who enter into contracts that provide for successive performances to work with experienced legal counsel in the drafting, review and enforcement of commercial contracts to avoid contractual disputes and litigation.

Related Practice Groups and Professionals

Employee Benefits | Sharon Goldzweig
Labor, Employment & Civil Rights | Aaron Davis
Business & Tax | Mark Kellogg
Business & Tax | Robert Burgee

Client Alert: Broker & Consultant Fee Transparency to Group Health Plans

As the health care arena continues to evolve following the ACA and its progeny, one common theme in the regulations has been to increase transparency in the marketplace. Following on that theme, the Department of Labor recently issued its Field Assistance Bulletin No. 2021-03 aimed at the fees charged by group health insurance brokerages and consultants. The language of the Bulletin sets forth the Department’s short to medium term enforcement policy in regard to the amendments made to ERISA section 408(b)(2)(B), which was included as part of the Consolidated Appropriations Act of 2021 (CAA). Taken together, these documents set forth one method the Department will take to achieve the government’s goal of requiring group health plan sponsors, who are charged to act in a fiduciary capacity, to consider the costs of the services provided by certain vendors.

Who is affected?

ERISA section 408(b)(2)(B) applies to all group health plans, regardless of group size, and includes both insured and self-funded plans; all of which are “covered plans.” The sole exception applies to certain small employer health reimbursement arrangements.

The new language applies to “covered service providers” who provide plan related services to “covered plans.” Covered service providers include individuals and entities that enter into a contract or arrangement to provide one or more of the following services to a covered plan:

Brokerage services with respect to selection of:
- Insurance products (including vision and dental);
- Plan management services, vendors, and administrative supports; and
- Stop-loss, pharmacy benefit, wellness, and other plan services.
Consulting services related to the development or implementation of:
- Plan design, insurance or insurance product selection (including vision and dental);
- Plan management services, vendors, group purchasing organization agreements, and services; and
- Stop-loss, pharmacy benefit, wellness, and other plan services.

In addition to providing covered services, the broker, consultant, or other covered service provider must reasonably expect $1,000 or more in direct or indirect compensation in connection with its contract or arrangement with the covered plan.

Additionally, the Bulletin clarifies that only covered service providers who are a party to the contract or arrangement with the covered plan are required to make the disclosure. In this way, the amended statute does not require affiliates or subcontractors, solely by virtue of offering services to the covered plan as an affiliate or subcontractor of the covered service provider, to individually make the disclosures, as they will not have entered into the contract or arrangement with the covered plan.[1]

What information must be disclosed?

Covered service providers must disclose to covered plans specified information regarding the services to be provided and the compensation the covered service provide reasonably expects to receive in connection with its services. At a minimum, this information must include:

A description of the services to be provided by the covered service provider;
- Including, where applicable, information about those services for which the covered service provider will provide or reasonably expects to provide services directly to the covered plan as a fiduciary.
A description of the direct compensation that the covered service provider expects to receive in connection with the contract or arrangement with the covered plan. In most instances, such direct compensation will include some form of commission.
A description of all indirect compensation that the covered service provider, its affiliates, or subcontractors expect to receive.
- Where a covered service provider employs the use of affiliates, subcontractors, or both, the disclosure should also include a description of the arrangement between the covered service provider and the affiliate or subcontractor.
- Indirect compensation disclosures should also include (1) an identification of the services for which such indirect compensation will be received, (2) any formulae relied up in the calculation of such indirect compensation, (3) identification of the payer of such indirect compensation, and (4) a description of the arrangement and any formula amongst and between the payer of the indirect compensation and the covered service provider, affiliates, or subcontractors.
A description of any compensation the covered service provider expects to receive in connection with the termination of the contract, along with a calculation of how any prepayments will be calculated and refunded.

In addition to describing the types of compensation, the covered service provider notice should also include the manner in which such compensation will be received.

Finally, a covered service provider must set forth the services that the covered service provider is rendering to the covered plan as a fiduciary.

When are the disclosures required?

The CAA amendments became applicable on December 27, 2021. Covered service providers, therefore, are required to make their fee disclosures for any new contracts or arrangements as of that date. The Bulletin clarifies that the “effective” date of the contract or arrangement is the date the contract or arrangement was executed, which may not necessarily be the beginning of a new plan year. Therefore, covered plans should consult with and collect the requisite information from their covered service providers for any contracts or arrangements that are written, renewed, or extended in 2022.

Furthermore, in order to meet the objectives of the policy (i.e. allowing covered plans to perform cost-benefit analysis related to the fees charged and services provided by their brokers and consultants), covered service providers are required to make the disclosures set forth above “reasonably in advance” of the date on which the contract or arrangement is entered into, extended, or renewed. Furthermore, any change in such disclosures are required to be made as soon as practicable.

How does a covered plan ensure disclosure?

While the disclosures contemplated by the statutory provision are intended to come from the covered service provider, the fiduciary responsibility rest with the covered plan sponsor. The primary enforcement mechanism, therefore, is to deem nonconforming deals to be prohibited transactions under the statute. However, no such determination shall be made provided covered plans meet the following requirements:

“The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required to be disclosed.
The responsible plan fiduciary, upon discovering that the covered service provider failed to disclose the required information, requests in writing that the covered service provider furnish such information.
If the covered service provider fails to comply with a written request…within 90 days of the request, the responsible plan fiduciary notifies the Secretary of the covered service provider’s failure…”

Conclusion

As plan fiduciaries consider their options this year, whether its with a new carrier or a renewal, they should begin working with their brokers and consultants to gain a better understanding of the fees that are charged and prepare to answer inquiries about the reasonableness thereof.

[1] Affiliates and subcontractors should review the nature of their relationship to covered plans to ensure that their services do not extend beyond the scope of the services provided on behalf of a covered service provider, thus possibly triggering the need for the affiliate or subcontractor itself to disclose.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients in business transactions, civil matters, regulatory compliance, and employee matters. Bob also has a background in employee benefits, having been a licensed agent since 2014. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Aaron L. Davis works in employee health and welfare benefits. He is also Chair of the firm’s labor law practice and serves as Firm Secretary. He has litigation experience in a diverse range of employment matters, including Title VII, the Age Discrimination and Employment Act, the Americans with Disabilities Act, the Family Medical Leave Act, and the Fair Labor Standards Act. You can reach him at 517.377.0822 or email him at adavis@fraserlawfirm.com.

[Client Alert] Outbreak Period Nightmare: Employee Benefit Deadline Extensions Now Based on Individual Case-by-Case Basis

Employee benefit plan administration is no small feat. However, it is becoming more and more difficult, especially with pandemic related modifications. As you may recall from our previous Client Alert regarding the Outbreak Period, various benefit deadlines were extended due to COVID-19. Plans could not deny certain benefits or impose certain deadlines during the designated Outbreak Period (i.e., March 1, 2020 through 60 days after the National Emergency ends (or another specified date)). However, when the Outbreak Period ends has been a lingering question recently, and the Department of Labor has just answered it in a way that may make plan administrators’ heads spin.

In summary, the period of time which must be disregarded for certain benefits deadline purposes (such as HIPAA special enrollment, as well as certain COBRA and claims procedure due dates) will now end on the earlier of: (a) 1 year from the date that the individual or plan was first eligible for the particular relief, or (b) 60 days after the announced end of the National Emergency (the end of the Outbreak Period). What does this mean? It means that plan administrators must keep track on a case-by-case basis of each individual who would have had a deadline imposed on/or after March 1, 2020 but for the 2020 relief, the date of the original deadline, and track one year from that date (unless the Outbreak Period ends earlier).

Background

Last year when the pandemic hit, and to assist plan participants and beneficiaries, employers and other plan sponsors, plan fiduciaries, and other service providers of employee benefit plans impacted by the COVID-19 pandemic, the U.S. government took the following action as authorized by ERISA Section 518:

2020 Disaster Relief Notice

On April 28, 2020, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued EBSA Disaster Relief Notice 2020-01 (Disaster Relief Notice). The Disaster Relief Notice provided deadline relief and other guidance and extended the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

2020 Joint Notice

Additionally, on April 28, 2020, the Department of Treasury, the Internal Revenue Service (IRS), and EBSA issued a joint notice which extended certain time frames affecting participants and beneficiaries under ERISA and the Internal Revenue Code (Joint Notice). The Joint Notice extended time frames affecting a participant’s right to group health plan coverage during the COVID-19 outbreak, special enrollment periods, and COBRA continuation of such coverage. Time periods for filing claims for benefits, appealing denied claims, and external review periods were also extended.

The Joint Notice is applicable to all group health plans, disability plans, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code. Specifically, the Joint Notice provided that these plans must disregard the period from March 1, 2020 until sixty (60) days after the National Emergency ends (or other specified date) when determining certain deadlines for plan participants, beneficiaries, qualified beneficiaries, and claimants. This period is called the Outbreak Period. In particular, plans must disregard the Outbreak Period for the following due dates:

HIPAA Special Enrollment
COBRA Election Period
COBRA Premium Payment Due Date
Date for Individuals to Notify the Plan of Qualifying Events or Disability Determinations
Claim Procedure Date for Individuals to File A Benefit Claim
- Keep in mind health FSA runout periods and forfeitures are also delayed during this period
Claim Procedure Date for Claimants to File An Appeal
Date for Claimants to File A Request for External Review
Date for Claimants to Perfect A Request for External Review

Note: The Joint Notice only extended the claims procedure deadlines for claimants; it did not explicitly extend the date by which a plan administrator had to respond to claims and appeals. However, the plan administrator’s deadlines for issuing such adverse benefit determination on claims and appeals would appear to fall within the general notice and disclosure relief provided by the Disaster Relief Notice.

Additionally, for purposes of group health plan obligations, the Outbreak Period is disregarded for the following:

Date to Provide a COBRA Election Notice

Employers and Plan Sponsors have had to pay close attention to these deadlines as they can have significant administrative and economic impacts.

Lingering Questions

However, many have questioned whether the deadline extension would end on February 28, 2021 due to statutory provisions within ERISA and the Internal Revenue Code stating that with such declared disasters, the Secretaries of Labor and Treasury may provide that periods of time up to one year may be disregarded when determining certain deadlines. That one year period from March 1, 2020 would have expired February 28, 2021.

However, the Department of Labor answered at the last hour, and unfortunately, the difficulty of these previous administrative functions has just been magnified.

Answer: EBSA Disaster Relief Notice 2021-01 (Released Friday, February 26, 2021)

On Friday, February 26, 2021, the Department of Labor released EBSA Disaster Relief Notice 2021-01. The Departments of Treasury, IRS and HHS have reviewed and concur with this guidance.

Instead of ending the disregarded periods on February 28, 2021, or instead of extending the period of disregarded periods to a future date certain, the Department of Labor instituted a case by case analysis, applicable to individuals and plans for whom timeframes were extended. Specifically, individuals and plans who are subject to the relief afforded under the 2020 Disaster Relief Notice and the 2020 Joint Notice as described above will have the applicable periods under the Notices disregarded until the earlier of:

(a) 1 year from the date they were first eligible for relief, or
(b) 60 days after the announced end of the National Emergency (the end of the Outbreak Period).

On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded under the Notices will resume. In no case will a disregarded period exceed 1 year.

Notice 2021-01 provides examples to illustrate application of the above:

If a qualified beneficiary, for example, would have been required to make a COBRA election by March 1, 2020, the Joint Notice delays that requirement until February 28, 2021, which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period (which remains ongoing). Similarly, if a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the Joint Notice delays that election requirement until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period. Likewise, if a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notices would end with respect to that notice or disclosure on February 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021. In all of these examples, the delay for actions required or permitted that is provided by the Notices does not exceed 1 year.

The Department of Labor further reiterates concerns over COVID-19 related problems that plan participants and beneficiaries may encounter. In such vain, the Department states as follows:

plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in cases where pandemic delayed deadlines are reinstated; and
plans should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames, such as:
- affirmatively sending a notice regarding the end of the relief period;
- reissuing or amending disclosures regarding the end of the relief period and the time period in which participants and beneficiaries are required to take action, e.g., COBRA election notices and claims procedure notices;
- reminding participants and beneficiaries who are losing coverage under ERISA group health plans that other coverage options may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace in their state.

The Department of Labor understands that full and timely compliance with ERISA’s disclosure and claims processing requirements by plans and service providers may not always be possible due to the end of the relief period. Good faith compliance will be taken into consideration.

Conclusion

The case-by-case determinations were not anticipated last year and will require continual monitoring and possibly enhanced recordkeeping, especially if initially imposed deadlines were not accurately recorded at the time due to the deadline delay. Plan sponsors should promptly speak with their benefit and COBRA administrators to ensure the new guidance can be followed. And, as mentioned by the Department of Labor, group health plan communications regarding these deadline changes should be made as quickly as possible.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.

Client Alert: Major Extension of Employee Benefit Plan Deadlines Due to COVID-19 Outbreak

The coronavirus outbreak has affected virtually every aspect of normal life and business relations, including operation and administration of employee benefit plans. To assist plan participants and beneficiaries, employers and other plan sponsors, plan fiduciaries, and other service providers of employee benefit plans impacted by the COVID-19 pandemic, the U.S. government took action as authorized by ERISA Section 518.

On April 28, 2020, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued EBSA Disaster Relief Notice 2020-01 (Disaster Relief Notice). The Disaster Relief Notice provides deadline relief and other guidance and extends the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

Additionally, on April 28, 2020, the Department of Treasury, the Internal Revenue Service, and EBSA issued a joint notice which extends certain time frames affecting participants and beneficiaries under ERISA and the Internal Revenue Code (Joint Notice). The Joint Notice extends certain time frames affecting a participant’s right to group health plan coverage during the COVID-19 outbreak, special enrollment periods, and COBRA continuation of such coverage after employment ends. Time periods for filing claims for benefits, appealing denied claims, and external review periods are also extended.

While the Department of Health and Human Services (HHS) was not involved in this round of guidance, it has been in consultation with EBSA and the Treasury and has advised that it will extend similar relief timeframes applicable to non-Federal governmental group health plans.

The News Release and Frequently Asked Questions regarding the Disaster Notice and Joint Notice can be found here:

FAQs

News Release

Joint Notice

The Joint Notice is applicable to all group health plans, disability plans, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code. Specifically, these plans must disregard the period from March 1, 2020 until sixty (60) days after the National Emergency ends (or other specified date) when determining certain deadlines for plan participants, beneficiaries, qualified beneficiaries, and claimants. This period is called the Outbreak Period. In particular, plans must disregard the Outbreak Period for the following due dates:

HIPAA Special Enrollment
COBRA Election Period
COBRA Premium Payment Due Date
Date for Individuals to Notify the Plan of Qualifying Events or Disability Determinations
Claim Procedure Date for Individuals to File A Benefit Claim
- Keep in mind health FSA runout periods and forfeitures are also delayed during this period
Claim Procedure Date for Claimants to File An Appeal
Date for Claimants to File A Request for External Review
Date for Claimants to Perfect A Request for External Review

Note: The Joint Notice only extends the claims procedure deadlines for claimants; it does not explicitly extend the date by which a plan administrator has to respond to claims and appeals. However, the plan administrator’s deadlines for issuing such adverse benefit determination on claims and appeals would appear to fall within the general notice and disclosure relief provided by the Disaster Relief Notice.

Additionally, for purposes of group health plan obligations, the Outbreak Period is disregarded for the following:

Date to Provide a COBRA Election Notice

The Joint Notice includes a number of examples to explain how these rules take effect. Each of these examples assumes that the National Emergency ends on April 30, 2020, meaning that the Outbreak Period extends from March 1, 2020 through June 29, 2020, the latter date being 60 days after the National Emergency ends.

With regard to COBRA, one of the listed examples maintains an employee loses group health plan coverage due to a reduction in hours. The COBRA election notice is provided on April 1, 2020. Although typically an individual has 60 days to elect COBRA, here the Outbreak Period is disregarded. Therefore, the 60 day period begins to run on June 29, 2020, so the individual has until August 28, 2020 to elect COBRA.

In another example, an employee was eligible for but declined enrollment in her employer’s group health plan. On March 31, 2020 she gave birth and wants to enroll herself and her child, which is a 30-day HIPAA special enrollment right. The Outbreak Period (again through June 29, 2020 for purposes of these examples) is disregarded, so the 30 day enrollment ends instead on July 29, 2020.

Employers will want to pay close attention to these deadlines as they can have significant administrative and economic impacts. For example, group health plans may have to bear the financial responsibility for continuing premium contributions for months prior to a beneficiary making a COBRA payment. See Example 3:

Example 3 (COBRA premium payments).

(i) Facts. On March 1, 2020, Individual C was receiving COBRA continuation coverage under a group health plan. More than 45 days had passed since Individual C had elected COBRA. Monthly premium payments are due by the first of the month. The plan does not permit qualified beneficiaries longer than the statutory 30-day grace period for making premium payments. Individual C made a timely February payment, but did not make the March payment or any subsequent payments during the Outbreak Period. As of July 1, Individual C has made no premium payments for March, April, May, or June. Does Individual C lose COBRA coverage, and if so for which month(s)?

(ii) Conclusion. In this Example 3, the Outbreak Period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made by 30 days after June 29, 2020, which is July 29, 2020, for March, April, May, and June 2020, are timely, and Individual C is entitled to COBRA continuation coverage for these months if she timely makes payment. Under the terms of the COBRA statute, premium payments are timely if made within 30 days from the date they are first due. In calculating the 30-day period, however, the Outbreak Period is disregarded, and payments for March, April, May, and June are all deemed to be timely if they are made within 30 days after the end of the Outbreak Period. Accordingly, premium payments for four months (i.e., March, April, May, and June) are all due by July 29, 2020. Individual C is eligible to receive coverage under the terms of the plan during this interim period even though some or all of Individual C’s premium payments may not be received until July 29, 2020. Since the due dates for Individual C’s premiums would be postponed and Individual C’s payment for premiums would be retroactive during the initial COBRA election period, Individual C’s insurer or plan may not deny coverage, and may make retroactive payments for benefits and services received by the participant during this time.

Importantly, the Joint Notice acknowledges that different geographical regions may have different Outbreak Period end dates. In such case, additional guidance will be issued.

Disaster Relief Notice

In the Disaster Relief Notice, the Department of Labor announced an extension of deadlines for furnishing certain required notices and disclosures to plan participants, beneficiaries and others in order for plan sponsors to meet their ERISA obligations during the coronavirus outbreak.

Participant Disclosures

Subject to the duration limitation in ERISA section 518, an employee benefit plan and the responsible plan fiduciary will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 National Emergency, if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. Good faith acts include use of electronic alternative means of communicating with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication, including email, text messages, and continuous access websites.

Such notices include Summary Plan Descriptions, Summaries of Material Modifications, benefit determinations, annual funding notices, periodic benefit statements, summary annual reports, participant fee disclosures, QDIA notices, and blackout notices, as long as good faith efforts are made to furnish these documents as soon as administratively practicable. Of note, this Disaster Relief Notice uses the same Outbreak Period as in the Joint Notice.

Employee Pension Benefit Plans

The Disaster Relief Notice also addresses certain items specific to employee pension benefit plans, including:

An ERISA retirement plan’s failure to follow the usual procedural requirements for plan loans and distributions will not be treated as a failure by the DOL, provided that:

The failure is solely attributable to the COVID-19 outbreak;
The plan administrator makes a good-faith diligent effort to comply with ERISA’s procedural requirements;
The plan administrator makes a reasonable attempt to correct any procedural deficiencies as soon as practicable.

The DOL confirmed that it will not treat participant loans as violating ERISA if those loans comply with the increased loan limits and/or suspension of loan repayments provided by the CARES Act, and that it will treat a plan as having been operated in accordance with its terms with respect to certain plan loan and distribution provisions available under the CARES Act if the plan satisfies the conditions for the extended amendment deadline under the CARES Act. This guidance is unsurprising, but appreciated.

The Disaster Relief Notice also indicates that the DOL will not take enforcement action if a plan fiduciary fails to meet the usual deadlines for forwarding participant contributions and loan repayments to a plan during the Outbreak Period, if the failure is solely attributable to the COVID-19 outbreak, provided the employer and/or service provider acts reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.

Finally, the Disaster Relief Notice specifically confirms that blackout notices are covered by the general good faith relief from notice and disclosure deadlines under ERISA section 518 described earlier, and further provides that a plan fiduciary is not required to make a written determination that the failure to meet the normal 30-day advance notice requirement was due to events beyond the reasonable control of the plan administrator, as a pandemic inherently satisfies that standard.

Form 5500 and Form M-1 Filing Relief

The IRS had previously extended the Form 5500 deadline in certain limited cases related to the COVID-19 pandemic. See IRS Notice 2020-23. Specifically, for filings otherwise due on or after April 1, 2020 and before July 15, 2020 are now due on July 15, 2020. This does NOT apply to calendar year plans as their filings are due July 31, 2020 and are outside the relief period. Presumably, this is because calendar year plans can already obtain an automatic extension of their 2019 Form 5500 deadline until October 15, 2020. However, the guidance indicates that the DOL will continue to monitor the situation and may issue further relief depending on how things unfold.

The Disaster Relief Notice now extends this same relief to Form M-1 filings. Form M-1 is applicable to multiple employer welfare arrangements (MEWAs) and certain other entities required to report for their ERISA group health plans. While Form M-1 is normally due March 1, if an entity had timely requested a 60-day extension, that extended period falls within the relief period and now would be due by July 15, 2020.

General Compliance Guidance

Last, the Disaster Relief Notice provides several points of general ERISA fiduciary compliance guidance during this coronavirus pandemic, notably that:

Plans must act reasonably, prudently, and in the interest of the covered workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic wellbeing.
Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments.
When the pandemic prevents plans and service providers from fully and timely complying with claims processing and other ERISA requirements, the Department of Labor will emphasize compliance assistance and include grace periods and other relief where appropriate.

Importantly, however, the fiduciary relief provided by the Disaster Relief Notice is generally limited to adoption of nonenforcement positions by the DOL. It does not necessarily restrict a participant’s ability to enforce his or her substantive rights under ERISA.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

CARES Act Relaxes Rules Regarding 2020 Retirement Plan Distributions

On Friday, the House of Representatives passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in dramatic fashion, with several members racing back to Washington after Representative Thomas Massie threatened to demand a recorded vote. The legislation (which had been previously passed on a unanimous vote by the Senate earlier in the week) was signed by President Trump shortly thereafter.

The CARES Act is the third extensive—roughly $2 trillion dollar—emergency relief package with numerous components designed to mitigate the rapid and sudden fallout from the COVID-19 pandemic. Among its 880 pages are a few changes that loosen the requirements applicable to distributions from retirement plans for 2020:

Retirement plans may permit individuals to take a “coronavirus-related distribution” of up to $100,000 in 2020, which will be exempt from the 10% early distribution penalty. In addition, individuals taking such distributions may pay tax on them ratably over three years and may repay them within a three-year period. Individuals will be eligible for such a distribution if they (or their spouse or dependent) test positive, or if they experience adverse financial consequences as a result of COVID-19 due to being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care, or closing or reducing hours of a business owned or operated by the individual (a “qualified individual”). A plan administrator may rely on a participant’s certification that he or she is a qualified individual. Plans that may offer these distributions include qualified defined contribution plans, 403(b) plans, governmental 457(b) plans, and IRAs. Although more clarification would be welcome, these rules are structured similarly to the new “qualified birth or adoption” rules under the recently-passed SECURE Act. As such, the availability of these distributions appears to be an optional plan provision.
With respect to participant loans taken within 180 days following passage of the CARES Act, the limits on permissible plan loans has been increased from $50,000 to $100,000 and from half of the participant’s vested account balance to the entire vested account balance. In addition, with respect to any qualified individual (as defined in the previous bullet) with an outstanding loan, any payments due during the remainder of 2020 are delayed by one year. It is our understanding that offering loans up to the increased limits is optional (as is offering loans at all); whether plan sponsors will be required to offer delayed repayment to affected individuals is less clear, but this aspect is likely mandatory.
Required minimum distributions (RMDs) are waived for 2020. This includes individuals who attained age 70½ in 2019 and did not take their first RMD prior to January 1, 2020. Impacted plans again include qualified defined contribution plans, 403(b) plans, governmental 457(b) plans, and IRAs. Though more guidance is needed on implementation, we expect this temporary waiver to operate similarly to the 2009 waiver under WRERA. If that is the case, plan sponsors would be able to determine whether they would offer the 2020 RMD waiver, and if so, what the default will be (i.e., to receive or not receive an RMD).

The CARES Act includes a delayed amendment deadline for the above changes set at the last day of the plan year beginning on or after January 1, 2022 (i.e., December 31, 2022 for calendar year plans). Governmental plans have two additional years.

Along with the above changes, the CARES Act contains some funding relief for sponsors of qualified defined benefit plans. Specifically, the Act delays minimum funding contributions otherwise due during calendar year 2020 until January 1, 2021 (though delayed contributions will be subject to an interest adjustment). In addition, the CARES Act permits plan sponsors to elect to treat the AFTAP for the last plan year ending before January 1, 2020 as the AFTAP for plan years which include calendar year 2020. This will help many plans avoid funding-based benefit limitations (including the inability to pay lump sums) that might otherwise come into play.
Finally, the CARES Act provides authority for the DOL to delay ERISA filing deadlines due to public health emergencies. Though the Act itself does not provide any delay, we anticipate that forthcoming DOL guidance will do so.

If you have any questions on how the CARES Act (or any other COVID-19 developments) may impact your organization’s retirement plans, please contact Brian Gallagher at bgallagher@fraserlawfirm.com.

Department of Labor Releases Proposed Regulations Expanding Employer’s Ability to Provide ERISA Disclosures Electronically

Pursuant to a 2018 Executive Order, the Department of Labor released proposed regulations this week which would expand an employer’s ability to provide ERISA disclosures electronically. These rules do not replace existing guidance, but instead add an additional safe harbor option for employers to comply.

The proposed regulations essentially adopt a “notice and access” regime under which employers may post required disclosures on a website and provide participants with notification of their availability and instructions for access. Critically—after providing a one-time initial notice on paper—this notification may be delivered electronically as a default, as long as the participant either:

Provides a personal email address to the employer, plan sponsor, or plan administrator, as a condition of his or her employment, OR
Is assigned an email address by the employer.

For former employees, the employer must take reasonable steps to ensure that it continues to have an accurate email address for the terminated participant. Participants who desire to receive the disclosures on paper are permitted to opt out of electronic delivery.

The content of the notice of internet availability is fairly standard, as far as ERISA disclosures go, and the proposed regulations place a strong emphasis on the use of ordinary language, indicating that the notice should use “short sentences without double negatives, everyday words rather than technical and legal terminology, active voice, and language that results in a Flesch Reading Ease test score of at least 60.” Generally, a separate notice is required for each document, but there are opportunities for combining these notices and providing them on an annual basis.

While these proposed rules are generally a positive development, we expect that employers will be disappointed to learn that—at least at this point—these rules are limited to retirement plans (although the proposed regulations do reserve consideration for the possibility of expansion to health and welfare plans). It is also important to note that these rules are merely proposed and that plan sponsors should continue following the existing ERISA disclosure rules unless and until the regulations are adopted as final.

If you have any questions about the rules that apply to participant disclosures for your retirement plans, please contact Brian Gallagher at (517) 377-0886 or bgallagher@fraserlawfirm.com.

Tax Reform Offers New Incentive for Employers Providing Paid FMLA Leave

Certain employers that provide paid leave under the Family and Medical Leave Act (“FMLA”) may be eligible to receive a general business tax credit for tax years beginning in 2018 and 2019. While the FMLA provides certain job-protected leave, it does not require such leave to be paid. The new law incentivizes employers to provide wage replacement. Continue reading Tax Reform Offers New Incentive for Employers Providing Paid FMLA Leave

Client Alert: DOL Announces April 1, 2018 as Final Applicability Date for Revised ERISA Claims Procedures Related to Disability Benefits

DOL Announces April 1, 2018 as Final Applicability Date for Revised ERISA Claims Procedures Related to Disability Benefits

In a news release issued earlier this month, the U.S. Department of Labor (“DOL”) announced its final decision to make significant changes to the ERISA claims procedures related to disability benefits applicable to claims filed after April 1, 2018. As previously advised, the DOL published final regulations on December 19, 2016 revising the existing claims and appeals procedures regulations under ERISA for employee benefit plans providing disability benefits (“Final Regulations”). According to the DOL, the intent of the Final Regulations is to strengthen the current procedures by adopting some of the additional procedural safeguards and protections for disability plan claims that are already in place for group health plan benefits pursuant to the Patient Protection and Affordable Care Act.

The Final Regulations were scheduled to apply to all disability benefits claims filed on or after January 1, 2018. However, on November 29, 2017, the DOL published another final rule delaying the applicability date of the Final Regulations for 90 days (through April 1, 2018). According to the DOL, the delay was necessary to enable the DOL to consider comments and data as part of its effort, pursuant to one of President Trump’s executive orders, to examine regulatory alternatives that meet its objectives of ensuring the full and fair review of disability benefit claims while not imposing unnecessary costs and adverse consequences and to determine whether the substantive provisions of the Final Regulations should be rescinded, modified, or retained.

The January 2018 news release confirms that the substantive provisions of the Final Regulations will be retained: “The Department received approximately 200 comment letters from the insurance industry, employer groups, consumer advocates, and lawyers representing disability benefit claimants, all of which are posted on the Department’s website. Only a few comments responded substantively to the Department’s request for quantitative data to support assertions that the final rule would drive up disability benefit plan costs by more than the Department had predicted, cause an increase in litigation, and consequently reduce workers’ access to disability insurance protections. The information provided in the comments did not establish that the final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.” Accordingly, the substantive provisions of the Final Regulations will apply to disability benefits for claims filed “after April 1, 2018.”

With the April 1, 2018 applicability date quickly approaching, it is imperative for employers to work with their insurance carriers, third party administrators, and attorneys to ensure that all underlying disability plans/benefits and associated documentation (including any ERISA wrap plans, Code section 125 cafeteria plans, and claims denial forms) are reviewed and updated to ensure legal compliance with the requirements for claims filings beginning after April 1, 2018.

The EBSA New Release can be found at: www.dol.gov/newsroom/releases/ebsa/ebsa20180105
The Final Rule Delaying the Applicability Date (published 11/29/17) can be found at: https://www.federalregister.gov/documents/2017/11/29/2017-25729/claims-procedure-for-plans-providing-disability-benefits-90-day-delay-of-applicability-date\
The Final Rule for Claims Procedures for Plans Providing Disability Benefits (published 12/19/16) can be found at: https://www.federalregister.gov/documents/2016/12/19/2016-30070/claims-procedure-for-plans-providing-disability-benefits

For highlights of the substantive provisions of the Final Regulations, please see our May 11, 2017 alert, http://www.fraserlawfirm.com/blog/2017/05/action-required-before-year-end-disability-plans-claims-and-appeals-procedures, or contact us.

Questions? Email Beth Latchana

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2018 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.