A CARES Act provision offers some relief to employee stock ownership plans by allowing the suspension of required minimum distributions for 2020.

In addition to providing individual stimulus payments and other individual-oriented assistance, the CARES Act contains some provisions aimed at retirement plans, some of which are of particular interest to companies that maintain employee stock ownership plans (ESOPs).

While much of the attention by regulators has been focused on the coronavirus (COVID-19) response and CARES Act/FFCRA guidance, they have not forgotten about the SECURE Act’s introduction of pooled employer plans (PEPs) (centrally administered defined contribution plans that can be joined by multiple unrelated employers).

One of the simplest yet most integral parts of meeting your ERISA fiduciary duties is “sticking to the plan.” Section 402(a)(1) of ERISA requires that every employee benefit plan it covers be established and maintained pursuant to a written instrument.

Establishing a written plan document is a nonfiduciary “settlor” activity. This means that all of the decisions that go into designing the plan are not subject to the ERISA standard of care and cannot be challenged for a breach of fiduciary duty.

On the other hand, following the written plan document in the day-to-day management and administration of the plan is a fiduciary duty under Section 404(a)(1)(D) of ERISA to the extent that it is consistent with ERISA. ERISA requires strict compliance, and veering from the plan’s written terms is generally a per se violation of ERISA. Failure to follow the written plan terms is the most obvious breach of fiduciary duty for a court or regulatory agency to spot and enforce. For example, where a fiduciary’s decision may or may not plainly be a breach of prudence under ERISA, a clear violation of the plan’s written terms may otherwise be the court’s or regulatory agency’s path to finding a breach.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on March 27 contains several emergency measures affecting retirement plans. The CARES Act gives plan sponsors the option of making available to participants, effective immediately, penalty-free coronavirus-related distributions as well as plan loans increased beyond the amount otherwise permitted under Internal Revenue Code (IRC) 72(p). Plan amendments for these provisions need not be adopted until the last day of the plan year beginning in 2022 (2024 for governmental plans). As plan sponsors eagerly put into place a portion or all of these relief measures, it is important to consider the special mid-year amendment rules that apply to safe harbor 401(k) plans.

Due to widespread court closures as a result of the coronavirus (COVID-19) pandemic, it may be difficult for participants or their attorneys to obtain a certified copy of a domestic relations order that many retirement plans require as part of the procedures for processing qualified domestic relations orders (QDROs). To address this issue, plans might consider adopting temporary procedures that allow for the continued qualification and processing of QDROs during these extraordinary circumstances without creating permanent exceptions to their normal QDRO procedures.

Internal Revenue Service (IRS) regulations require that spousal consent to the waiver of a qualified joint and survivor annuity (QJSA) that is necessary to elect an optional retirement payment form must be signed in the “physical presence” of a plan representative or notary—a requirement that is difficult to satisfy in a time of social distancing due to the coronavirus (COVID‑19) pandemic.

Many plan administrators are loathe to default all married participants into the QJSA or qualified optional survivor annuity (QOSA) simply because the IRS regulations did not contemplate the extraordinary and unprecedented circumstances caused by the pandemic or the development of technology that would protect the interests of the spouse even without a “physical presence” waiver. While available technology may provide plan administrators and sponsors with alternative means for obtaining spousal waivers, it is important for plan administrators to appreciate the issues and consider the risks.

This Insight authored by Morgan Lewis lawyers and published by Bloomberg Law poses 100 questions related to the COVID-19 payroll tax and fringe benefits provisions, which we have been explaining in our LawFlashes – including the 6.2% payroll tax deferral, leave and retention credits, PPP loans, Section 139 benefits, business expense reimbursements, and leave-sharing.  Are these the questions that you and your colleagues are tackling, debating, and looking for Treasury and the IRS to answer?

The $100,000 limit on coronavirus‑related distributions (CVRD) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is both an individual limit and a plan limit. Tracking and enforcing the $100,000 limit has the potential to create special compliance issues for employers and controlled group affiliates that sponsor more than one retirement plan and have individuals with an account balance under more than one of those plans.

Under the CARES Act, an eligible individual—that is, an individual who satisfies the requirements to be eligible to take a CVRD (discussed in in more detail in our prior blog post)—may take CVRDs during calendar year 2020 of up to $100,000. This individual limit applies in the aggregate to all CVRDs from the individual’s IRAs and employer‑sponsored retirement plans.

The US Departments of Labor, Health and Human Services, and the Treasury (Departments) issued a set of 14 frequently asked questions (FAQs) on April 11. The FAQs are intended to offer guidance on the application and implementation of the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and other health coverage issues related to the coronavirus (COVID-19). The FAQs generally are applicable for the duration of the public health emergency associated with COVID-19 (which will end no earlier than June 16, 2020).

Due to the economic and financial upheaval caused by the coronavirus (COVID-19) pandemic, many employees are asking their employers if they are able to cancel their deferral elections and/or receive accelerated payments from their nonqualified deferred compensation plan accounts to help offset financial difficulties they may be facing.

Generally, Internal Revenue Code Section 409A and the regulations promulgated thereunder do not allow for the alteration or cancellation of deferral elections or the acceleration of payments under plans subject to Section 409A. However, Section 409A does allow for the cancellation of a deferral election and/or acceleration of payments if an employee experiences an “unforeseeable emergency” within the meaning of Section 409A.