Tuesday, October 19 2021

Since the start of the COVID-19 pandemic, we have received daily calls and emails from our customers asking how leaves, layoffs, the CARES Act and a host of other pandemic-related changes are affecting plans. benefits they offer to their employees. These conversations inevitably lead to the question “Do we need an amendment to the plan for this?” This article describes some of the top questions we receive in the health, wellness, and pension industry regarding the need for plan change. While the answer is often “it depends,” at a minimum, this article will help you, as a plan sponsor, determine what information is needed to decide if a plan change is necessary.

We added the CARES Act distributions and the suspension of minimum distributions required for 2020 to our 401 (k) plan. Do we need an amendment for this?

  • Yes. You will need to modify your plan to reflect one of the features of the CARES Act 401 (k) plan that you have added to your 401 (k) plan. However, you have until the end of the plan year beginning on or after January 1, 2022 to adopt this change (subject to an additional 2 years for government plans).

  • If you have an individually designed plan, you’ll want to work with your legal counsel to prepare for this change. If you have a prototype or volume submission plan, your document provider will prepare this change for you.

    • Side note: For companies with individually designed plans, we recommend that you document your decisions and send them now to the legal advisor who will be responsible for drafting the amendments. It should be a lot easier than retracing your steps in two or more years.

We are suspending matching contributions to the company’s 401 (k) plan. Do we need an amendment for this?

  • Yes for almost all plans. If your plan only has a discretionary year-end match, you may not need a plan change. Otherwise, you will need a formal plan amendment to suspend (or reduce) the company’s matching contributions. Also, unless your company provides matching contributions at the end of the year and only for those members who are employed on the last day of the year, you will need to adopt this plan change prior to the suspension.

    • Side note: 401 (k) plans that rely on a safe harbor to pass non-discrimination tests are required to give at least 30 days’ notice of any reduction in the company’s matching contributions (and the rules of the Internal Revenue Service (IRS) sometimes limit a plan sponsor’s ability to change matching contributions in a safe harbor plan).

The CARES Act allows employees to use funds in their Flexible Medical Expense Account (FSA) and Health Reimbursement Account (HRA) to pay for over-the-counter (OTC) drugs. Do we need an amendment to the plan to reflect this change?

  • Probably not but it depends. Most cafeteria plans (the plan that includes an FSA medical benefit) and HRA plan documents simply refer to allowable expenses under the relevant section of the Code (section 213 (d)) and do not include details on the specific types of expenses covered. If your company’s cafeteria / HRA plan is written this way, you do not need to change the plan. If your plan is written to specify the types of eligible expenses or contains a prohibition on reimbursement of over-the-counter drugs, then you’ll want to adopt a plan amendment by the end of the year to change that.

  • If you have an individually designed plan, you’ll want to work with your legal counsel to identify and prepare any necessary plan changes. If you have a “check the box” plan from your Third Party Administrator (TPA), then your TPA should be able to help you with any necessary plan changes.

  • Whether or not you need a plan change, you or your PTA will likely want to update your Plan Summary Description (SPD) and other plan communications to reflect this permanent change.

I have read that the Department of Labor (DOL) and the Internal Revenue Service have extended the timelines for COBRA elections, COBRA payments, special HIPAA registration events, and ERISA plan claims and appeals. Do we need to change our plans to change these deadlines?

  • Preferably not. DOL guidelines state that a plan will not be treated as not performing according to its terms solely because of meeting a deadline extension. This gives us great reassurance that companies don’t need to change their plans to reflect different time extensions. Nevertheless, …

  • We recommend that companies communicate these changes to their affected employees and former employees. This will likely require coordination with your COBRA administrator, TPAs, and insurers. We also recommend that companies distribute a Physical Change Summary (SMM) that describes these changes to help defend any “If you told me, I would have…” claims. This could take the form of a single SMM that covers all relevant benefit plans. For the good news, the DOL has temporarily relaxed its rules on electronic communications and will allow “good faith” efforts which could include communication by email, website posting or text where it would not otherwise be permitted. under ERISA.

    • Side note: There are many delicate issues associated with these expiry dates, which apply retroactively to expiries that occur after March 1. ? If so, for self-funded plans, how will this affect stop loss insurance and agreements with network providers, among others? For insured plans, will a company need to cover premiums in order to maintain coverage? What about situations where a company has already denied COBRA coverage due to a late election or denied coverage for a new spouse because the employee did not request the change within 30 days following marriage?

We have placed employees on unpaid leave (a / k / a leave) and wish to continue to receive their medical benefits during this leave. Do we need an amendment to the plan for this?

Also, while we are talking about plan changes, let’s remember that qualified pension plans (401 (k) and pension) will need changes to comply with the SECURE Act (for example, minimum distributions required from 72 instead of 70 ½, participation of part-time employees). The deadline is the last day of the first year of the plan starting on or after January 1, 2022, unless extended. For more information, Click here.

Additional Resources:

  • The impact of the CARES law on social benefit plans, Click here.

  • Considerations Relating to Benefit Plans Regarding Layoffs and Leave, Click here.

  • New options for cafeteria plan election changes and related plan changes, Click here.

© 2021 Foley & Lardner srlRevue nationale de droit, volume X, number 141


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