DOL

The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.

The Department of Labor’s Employee Benefit Security Administration has announced the extension of the public comment period for proposed amendments to procedures governing the filing and processing of prohibited transaction exemption applications. The comment period was initially set to expire on April 14, 2022, but has been extended an additional 45 days through May 29, 2022.

The agency has received multiple requests from interested parties to grant additional time to develop and submit comments. Details of the proposal were previously announced and can be found here.

The House Committee on Education and Labor approved by a 29-21 party line vote to release the Protecting America’s Retirement Security Act without amendments to the House floor for consideration. The bill contains the following retirement plan proposals.

• Requires the Department of Labor, within two years of enactment, to explore how disclosure requirements for participant directed individual account plans can be improved to enhance participants’ understanding of fees and expenses and their cumulative effect on savings over time
• Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to require spousal consent and notarization for all distributions, with certain exceptions
• Amends ERISA and the Internal Revenue Code to require eligible employees who are not participating in the plan to be re-enrolled at least every 3 years for any automatic contribution arrangement that becomes effective after December 31, 2024

The Department of Labor (DOL) has released a proposal that would supersede the Department’s existing procedure governing applications for exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The Secretary of Labor is authorized to grant such exemptions and provide procedures for relief. Highlights of the proposal suggest substantially stricter standards and additional criteria for obtaining prohibited transaction relief, if implemented.

The DOL emphasizes that it will apply a high level of scrutiny to any retroactive exemption—including ensuring that no participants were harmed—and suggests contacting the agency before engaging in the transaction. Any information provided to the Office of Exemption Determinations, including during the pre-submission process, becomes part of an administrative record that is open for public inspection.

The DOL states that a previously issued exemption is not determinative of whether a future exemption would be approved under the same fact pattern. The DOL also proposes additional requirements in the application for exemption, several of which are highlighted below.

• The reason(s) for engaging in the exemption transaction
• Any material benefit that a party involved in the exemption transaction may receive because of the transaction
• The costs and benefits of the exemption transaction to the affected plan(s), participants, and beneficiaries—including quantification of those costs and benefits, if possible
• A detailed statement that describes possible alternatives to the exemption transaction and why the applicant did not pursue those alternatives
• A description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted
• A statement that the transaction will be in the best interest of the plan and its participants and beneficiaries
• A statement that all compensation received, directly or indirectly, by a party involved in the exemption transaction will not exceed reasonable compensation within the meaning of ERISA and the Internal Revenue Code
• All statements made to the DOL, the plan, or, if applicable, the qualified independent fiduciary or qualified independent appraiser cannot be materially misleading at the time the statements are made
• A statement whether any prior transactions have occurred between the plan or plan sponsor and a party involved in the exemption transaction

The proposal modifies the definition of a qualified independent appraiser. It also addresses contractual obligations, prohibits indemnifications, and requires detailed information regarding relationships with any party or its affiliates (including past engagements) in an effort to determine independence. Similarly, the proposal expands requirements of qualified independent fiduciaries by prohibiting indemnifications, requiring fiduciary liability insurance sufficient to cover damages resulting by a breach of the independent fiduciary, and certifying that the exemption transaction complies with impartial conduct standards and the independent fiduciary has no conflicts of interest that could affect their judgement.

Under the proposal, applicants would have a duty to promptly notify the DOL of any material changes to representations made during the application process or after approval of the exemption, including disclosing whether a participating party in the exemption is the subject of an investigation or enforcement action. The changes would apply 90 days following receipt of a final rule in the Federal Register. Comments on the proposed rule must be submitted to the DOL by April 14, 2022.

Final regulations entitled, Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), have been received by the federal Office of Management and Budget (OMB). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options, to file one common Form 5500 beginning in 2022. Proposed guidance was issued last fall under a larger guidance package, with details shared in a Washington Pulse.

The Department of Labor’s (DOL’s) Wage and Hour Division has released a proposed rule Updating the Davis-Bacon and Related Acts Regulations. The DOL indicates that the proposal is the most comprehensive review of the Davis-Bacon Act regulations in 40 years.

The Davis-Bacon Act generally requires payment of locally prevailing wages under direct federal contracts and for covered contractors and their subcontractors. The employer’s obligation can be met by paying the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-provided bona fide fringe benefits—including pension and health benefits.

All comments must be received within 60 days of the rule being posted in the Federal Register. While the Wage and Hour Division solicits comments from across the construction industry, it encourages all stakeholders to participate in the process.

The Department of Labor (DOL) has issued Compliance Assistance Release 2022-01 pertaining to the use of cryptocurrencies as plan investments in 401(k) plans. In it, the DOL cautions fiduciaries to exercise extreme care before considering the addition of cryptocurrency options in a plan’s investment menu and elaborates that the failure to remove an imprudent investment option from a menu of options is a breach of fiduciary duty.

The DOL expresses concerns about significant risks and challenges related to fraud, theft, and loss due the following factors

• Speculative and volatile investments due to early stage of development
• Ability for participants to make informed investment decisions due to the unique nature of cryptocurrencies and lack of investor knowledge
• Custodial and recordkeeping concerns related to the asset not being held in a trust or custodial account but rather, stored as “lines of computer code in a digital wallet”
• Valuation concerns with reliability and accuracy, citing disagreements by experts
• Evolving regulatory environment that could result in unlawful transactions or inadequate disclosures

The DOL intends to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products—including those within brokerage windows and take “appropriate action” to protect the interests of plan participants and beneficiaries.

In March 2020, the President declared a national emergency effective March 1, 2020, due to the COVID-19 outbreak. The national emergency was extended for one year until February 28, 2022. On February 18, 2022, the President once again extended the national emergency until February 28, 2023.

The extended national emergency provides relief to health and welfare plans related to the following.

• COBRA notices (i.e., employer and employee), payment, and election
• HIPAA special enrollment requests
• Claims and appeals request and claims perfection

As clarified in Notice 2021-01, the Department of Labor, the Internal Revenue Service, and the Department of Treasury explained the disregarded period applies on a person-by person basis and cannot exceed one year, as follows:

• one year from the date an individual was first eligible for relief, or
• 60 days after the announced end of the National Emergency.

Employers should continue to monitor deadlines pursuant to prior guidance.

The Department of Labor has published a Request for Information (RFI) seeking what actions, if any, the department should take to protect retirement savings from risks associated with climate change. According to a DOL news release, the RFI follows President Biden’s Executive Order on Climate-Related Financial Risk, which directs the department to identify actions it can take under ERISA and other relevant laws to safeguard the life savings and pensions of U.S. workers and families from threats of climate-related financial risk. The DOL previously issued a proposed rule “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights”, however the RFI deals with a broader set of questions than the proposed rule and is a different initiative. The RFI’s comment period will run for 90 days after publication in the Federal Register.

Group health plans and health insurance issuers must provide benefits for certain items and services related to testing for the detection and diagnosis of COVID-19, including over-the-counter (OTC) COVID-19 tests. The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act require that these services be provided without imposing cost-sharing requirements, prior authorization, or other medical management requirements.

On February 4, 2022, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued Frequently Asked Questions (FAQs). These FAQs provide additional guidance on the requirement to provide coverage for OTC COVID-19 tests without a prescription or individualized clinical assessment from a health care provider.

The FAQs provide guidance in the following areas.

• Limits on Coverage: Plans or issuers may limit reimbursement to the lesser of the actual price of the test, or $12 per test. Each covered participant, beneficiary, or enrollee may be reimbursed for at least 8 tests per 30-day period (or per calendar month). The plan or issuer must calculate the reimbursement based on the number of tests in a package.
• Direct-to-Consumer Coverage: Plans or issuers that provide direct coverage of OTC COVID-19 tests through both a pharmacy network and a direct-to-consumer program, and otherwise limits reimbursement for OTC COVID-19 tests from nonpreferred pharmacies or other retailers to the lesser of the actual price of the test, or $12 per test, will not be subject to enforcement action. To provide adequate access, the plan or issuer must make OTC COVID-19 tests available through at least one direct-to-consumer shipping mechanism and at least one in-person mechanism. The direct-to-consumer mechanism may include online or telephone ordering, but the plan or issuer must cover the cost of shipping.
• Impact of Supply Shortage: Plans or issuers will not be out of compliance if they temporarily cannot provide adequate access because of a supply shortage.
• Fraud or Abuse: Plans or issuers may take reasonable steps to prevent, detect, and address fraud and abuse. For example, a plan or issuer can require tests to be purchased from an established retailer, substantiate the purchase by carefully reviewing receipts and documentation, and require the individual to attest that the product will not be resold.
• Self-Collected Sample with Lab Processing: OTC COVID-19 tests must be self-administered and self-read without the involvement of a health care provider. The OTC COVID-19 coverage rules do not apply when an individual sends the specimen to be processed in a laboratory. These tests must be ordered by a health care provider.
• FSA/HRA/HSA: The cost of OTC COVID-19 tests purchased after January 15, 2022, are eligible for reimbursement from a group health plan or issuer.  Individuals may not seek reimbursement more than once for the same medical expense. When notifying individuals about any direct coverage or reimbursement, the plan or issuer must include a reminder stating that the same medical expense may not be submitted to a health flexible spending account FSA), health reimbursement arrangement (HRA), or health savings account (HSA).

Further developments, including any clarifying guidance will be shared.