Benefits Monthly Minute

Social Distancing for Signatures | Without Concrete Injury, Pensioners Lack Standing and the Thole Case Falls | Guess Who’s Back? PCORI’s Back

Social Distancing for Signatures

In light of the implementation of social distancing rules during the pandemic, IRS Notice 2020-42 provides relief for participant elections required to be witnessed by a plan representative or a notary public, including spousal consents. The relief generally allows for remote signatures and covers the period from January 1, 2020, to December 31, 2020. While this new relief is specifically intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted under the CARES Act, it also applies to any participant election that requires the signature to be witnessed in the physical presence of a plan representative or notary. Under this relief, the individual may use an electronic system (whether for remote notarization or for elections witnessed by a plan representative) if executed via live audio-video technology and if certain requirements are met.

Without Concrete Injury, Pensioners Lack Standing and the Thole Case Falls

In Thole vs. U.S. Bank, two defined benefit plan participants claimed that defendants violated ERISA’s duties of loyalty and prudence by poorly investing defined benefit plan assets, and sought payment of about $750 million in alleged losses and $31 million in attorney’s fees. On appeal, a divided Supreme Court held that the two plan participants, who were retirees and fully vested, lacked standing to sue the plan because they had continued to receive all benefits due to them, and accordingly lacked a "concrete injury" as required for standing. This is a considerable win for defined benefit plan fiduciaries. Industry experts have suggested that the Thole decision eviscerates pensioners’ ability to seek redress for fiduciary violations unless they have suffered pecuniary harm. Despite the impact on defined benefit plans, we do not expect Thole to significantly impact defined contribution plan litigation given defined contribution plan participants can establish standing more readily where account values are directly correlated with the plan’s overall financial condition.

Guess Who’s Back? PCORI’s Back.

The PCORI fee, which helps fund the Patient-Centered Outcomes Research Trust Fund (PCORTF), was initially required for plan and policy years ending before October 1, 2019. However, budget legislation passed in December 2019 extended the fee through plan years ending before October 1, 2029, as previously reported in the February, 2020 Monthly Minute. In Notice 2020-44, the IRS announced the dollar amount to be used for purposes of determining the PCORI fee for policy years and plan years that end on or after October 1, 2019, and before October 1, 2020, is $2.54. Also, under this new guidance, employers may apply any of the existing methods when calculating the number of covered lives, and for plans with plan years ending between October 1, 2019, and October 1, 2020,  any other reasonable calculation method may be adopted, provided it is used consistently for the duration of the plan year.

The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.

Lisa Wintersheimer Michel

John F. Meisenhelder

Helana A. Darrow

Antoinette L. Schindel

Kelly E. MacDonald

KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.

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