The COVID-19 pandemic has brought about an overwhelming number of changes for employers in the past few months, requiring them to realign their plans and policies to incorporate regulatory changes affecting employee benefits. In this environment, it’s important for employers to ensure these changes have not triggered any adverse consequences like benefits litigation related to the coronavirus.
Employers are encouraged to review their actions related to benefits plans during the COVID-19 crisis for these potential areas of concern.
Investment decisions for retirement plans
During times of stock market volatility, there is typically an increase in the number of ERISA claims filed seeking recovery of investment losses. In these cases, plaintiffs typically assert that, based on information that plan fiduciaries had about the value of company stock, they should have reduced or eliminated a plan’s investment in company stock or disclosed that information so the stock would be properly valued. Doing so would most likely expose those fiduciaries and employers to securities law violations, since company insiders may not trade on inside information, and making any potentially negative company information public may cause additional losses to a stock’s value.
Given the erratic financial markets, many fiduciaries may have opted to stay the course and not make any changes to their plans. All investment decisions — including the decision not to make a change — should be thoroughly documented. While it is certainly prudent to review investment decisions during this time, your review must be well documented in order to adhere to ERISA rules on prudent processes, and it should include an ongoing evaluation of investment management fees and costs.
Benefits for laid off or furloughed employees
Employers may not discriminate in favor of any particular group of employees when determining plan eligibility. Any decisions made about whether to continue benefits to laid off or furloughed employees should ensure the uniform treatment of both highly paid and non-highly paid employees; otherwise the plan’s favorable tax treatment may be jeopardized.
Benefits notifications for separating employees
Plan administrators are required to provide separating employees with timely notice of COBRA or other state-mandated continuation coverage benefits via a continuation coverage election notice for each affected beneficiary, including the covered employee, spouse, and any dependent child. While the U.S. Department of Labor has extended the time that a health plan administrator or sponsor has to provide a COBRA election notice, careful attention should be paid to when and how election notices are provided and tracked.
In addition, employers need to provide timely notice of any other post-employment continuation of benefits, including those that offer limited windows of time for separating employees to take action.
Changes to COVID-19-related benefits strategy
Layoffs and furloughs due to the COVID-19 pandemic may have caused some employers to change course when it comes to the continuation or discontinuation of benefits for affected employees. Any changes to eligibility rules or other benefits strategies call for amending plan documents so they align with the new practices. Employers also need to check in with benefits administrators, insurers, and stop-loss carriers to be sure they are aware of and concur with these changes.