EBSA provides disaster relief for retirement plans

The Employee Retirement Income Security Act (ERISA) requires retirement plan fiduciaries to satisfy a number of duties, not the least of which are the exclusive benefit rule and the prudent person standard. Recognizing that many fiduciaries may be struggling to satisfy their duties under ERISA—as their employees, work environment, and/or business partners have been affected by the COVID-19 pandemic—the Employee Benefits Security Administration's (EBSA’s) notice provides some relief.

The relief period provided by the notice began on March 1, 2020, and will end 60 days after the president declares the end of the COVID-19 national emergency or another date chosen by the U.S. Department of Labor (DOL) (although no later than February 28, 2021). If the national emergency is declared to be over on different dates across the country, the DOL will provide further guidance defining the end date (or dates) of the relief period.

Retirement plan fiduciaries are required to provide various notices, disclosures, and other communications to participants and beneficiaries according to an established calendar. The notice extends the deadlines for documents subject to DOL oversight, permitting plan sponsors to provide the necessary information as soon as reasonably practicable under the circumstances.

This may be welcome news for plan fiduciaries who are struggling to meet their deadlines due to lack of staffing or other COVID-19-related difficulties; however, because the relief is available only to fiduciaries who act in good faith, fiduciaries must comply with the prescribed time periods to the extent possible by relying on the extended time only as necessary. 

In this instance, good faith efforts include the use of electronic means of communication, such as email, text, and posting to a website, if the plan administrator and fiduciaries reasonably believe that participants (active or terminated) and beneficiaries are equipped to receive information provided using these methods. This is a relaxation of the currently applicable electronic disclosure rules. 

Notices covered by the relief include:

• quarterly and annual statements,
• defined benefit (DB) annual funding notices, and
• automatic-enrollment and qualified default investment alternative notices.

Note that safe harbor plan notices are governed by the IRS and are not covered by the relief provided by the EBSA notice. 

Special consideration for blackout notices

The notice draws particular attention to blackout notices for DC plans. According to DOL rules, a blackout notice must be provided to a participant or beneficiary 30 days in advance of a period during which that individual’s rights will “be temporarily suspended, limited, or restricted.” Typically, a blackout period occurs when plans convert assets between recordkeepers, restricting participants from taking certain actions, such as distributions, loan disbursements, and investment changes, for a period of at least three days; it may also apply in other instances.

The current rules already permit a blackout notice to be provided as soon as administratively practical when an event that is outside the reasonable control of the plan administrator and/or fiduciary occurs. The notice provides that the COVID-19 pandemic is such an event, permitting the blackout notice to be provided as soon as reasonably practicable, and it eliminates the requirement that a plan fiduciary certify that the event was outside the reasonable control of the plan administrator and/or fiduciary.

EBSA's notice provides additional relief to businesses affected by the COVID-19 pandemic. 

Loans and distributions

Plans that fail to follow certain loan and distribution verification procedures will not be considered to be in breach if: 

• the failure is solely attributable to the COVID-19 pandemic, 
• the plan administrator makes a “good faith diligent effort” to adhere to the plan’s requirements, and 
• the plan administrator makes a reasonable effort to gather the missing documentation as soon as reasonably practicable after the issuance of such loan and/or distribution. 

Note that the relief provided extends only to procedures and requirements subject to the DOL’s jurisdiction. The notice does not provide relief to requirements that are subject to IRS oversight; for example, spousal consent must continue to be obtained when required.

Contributions and loan repayments

To the extent that there is a temporary delay in remitting participant contributions and loan repayments to the plan’s trustee that results solely from the impact of the COVID-19 pandemic, the DOL will not consider such a delay to cause a prohibited transaction. If, however, your business is not affected by the COVID-19 pandemic, you do not have an extension of time to remit participant contributions and loan repayments.

CARES Act loan provisions

The notice confirms that the DOL will not enforce its requirement that certain loans be adequately secured (usually by 50% of a participant’s account balance) and be repaid on a reasonably equivalent basis. This is true only for loans taken by qualified individuals under the CARES Act (which, temporarily—through September 22, 2020—increases the loan limit to the lesser of $100,000 or 100% of a participant’s account balance and suspends loan repayments due before December 31, 2020).

The wide-ranging relief outlined in EBSA Notice 2020-01 is intended to make it easier for businesses affected by COVID-19 to satisfy the requirements of their ERISA retirement plans. Although the relief provided by the notice is available—if needed—to satisfy the fiduciary duties of prudence and loyalty and the exclusive benefit rule, it’s up to plan fiduciaries to determine whether the relief provided by the notice is actually necessary for their particular circumstances.