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.

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 IRS has extended the last day of the Initial Remedial Amendment Period for Section 403(b) plans from March 31, 2020 to June 30, 2020. As described in our earlier LawFlash, the Initial Remedial Amendment Period permits employers to correct form defects in their plan documents retroactive to as far back as January 1, 2010. The IRS determined that under the current circumstances, it was appropriate to extend the deadline given the current strains on tax-exempt employers.

UPDATED March 24, 2020

The following states have been declared major disaster areas and, where indicated, are eligible for the Federal Emergency Management Agency’s (FEMA’s) Crisis Counseling Program, which FEMA identifies as a form of individual assistance:

Major Disaster Area

Date Declared

Incident Period

Crisis Counseling Program or other Individual Assistance

New York State

March 20, 2020

January 20, 2020, and continuing

Yes

California

March 22, 2020

January 20, 2020, and continuing

Yes

Washington State

March 22, 2020

January 20, 2020, and continuing

Yes

Iowa

March 23, 2020

March 21, 2020, and continuing

No/Unclear*

Louisiana

March 24, 2020

January 20, 2020, and continuing

Yes


* Unlike the announcements regarding the other states identified in this chart, FEMA's announcement of Iowa as a major disaster area did not include any reference to the Crisis Counseling Program or other individual assistance being available at this time. However, this does not preclude FEMA from identifying individual assistance that is available in Iowa at a later date.

Our employee benefits and executive compensation practice is available to help employers evaluate and troubleshoot potential issues arising from the changing work environment and economic situation caused by the COVID-19 pandemic. This guidance reviews the employee benefits and executive compensation issues that we have been assisting clients with in the last few days.

Please contact the authors or your Morgan Lewis contacts if you have questions related to employee benefits and executive compensation in the midst of coronavirus COVID-19. For updated, comprehensive information about COVID-19, please see our resource page.

The US Supreme Court recently decided a closely watched ERISA case against employers and fiduciaries. Under Section 413 of ERISA, the statute of limitations for a fiduciary breach claim is shortened from six years to three years if the plaintiff has “actual knowledge” of the breach.

On February 26, the Supreme Court determined in Intel Corp. Investment Policy Committee v. Sulyma that the six-year statute may apply—even if the fiduciary disclosed its actions to participants in accordance with ERISA—if the participants failed to read or could not remember reading the disclosures. In the Court’s unanimous view, “actual knowledge” means the participant must have become aware of the relevant information.

Ever since defined contribution plans have come to dominate the retirement plan landscape, both plan sponsors and policymakers have grappled with how to help employees take a lifetime’s worth of savings and convert it into a sustainable source of retirement income. One way to help participants meet retirement income needs is to integrate guaranteed income products into defined contribution plan lineups. Fiduciaries have expressed concern, however, about potential liability they may face for the selection of annuity providers. The SECURE Act, signed into law by President Donald Trump on December 20, 2019, may help allay those concerns.

SECURE Act Makes Significant Changes to Benefits Laws

December 26, 2019 (Updated February 6, 2020)

The SECURE Act—potentially the most impactful benefits legislation since the Pension Protection Act of 2006—was included in the bipartisan spending bill signed into law on December 20, 2019. The SECURE Act includes provisions that affect tax-qualified retirement plans and individual retirement accounts. Other provisions of the spending bill affect executive compensation and healthcare benefits.

We will continue to update you on the effects of the SECURE Act. Our current publications include the following:

Keep an eye out for upcoming LawFlashes on other key aspects of the SECURE Act and how the spending bill impacts employee benefits and tax-deferred savings.

Tax laws have long required that qualified retirement plans timely adopt written plan documents and amendments. But what evidence must a plan sponsor provide to an IRS auditor to prove that they have timely adopted a written plan document and required amendments? The IRS recently addressed this question in Chief Counsel Memorandum 2019‑002 (the CCM), which advises that absent extraordinary circumstances, “. . . it is appropriate for IRS exam agents and others to pursue plan disqualification if a signed plan document cannot be produced by the taxpayer.”

The primary question addressed in the CCM was whether a taxpayer can argue that, based on Val Lanes Recreation Center Corp. v. Commissioner, T.C. Memo 2018-92, it meets its burden to have an executed plan document by producing an unsigned plan and evidence of a pattern and practice of signing plan documents. The IRS’s answer as outlined in the CCM is: No, at least not in the absence of extraordinary circumstances.