Retirement Plan Relief for Employees under the CARES Act – Expanded Distributions and Loans

Contributed by Kelly Haab-Tallitsch, April 7, 2020

concept of saving, economy and finance

Recent legislation providing COVID-19 relief to individuals and businesses includes provisions allowing more flexibility under retirement plans for individuals impacted by COVID-19. The CARES Act permits special hardship distributions of up to $100,000 from most tax-qualified retirement plans without early-withdrawal penalty taxes, increases the maximum 401(k) loan available for participants impacted by the pandemic and allows a delay in existing loan repayments. Required minimum distributions from defined contribution plans are waived for 2020.

Coronavirus-Related Hardship Distributions and Loans

The CARES Act allows plan sponsors to adopt special provisions expanding distributions and loans for “qualified participants.” A “qualified participant” is a plan participant who: (1) is diagnosed with COVID-19, (2) has a spouse or dependent diagnosed with COVID-19, or (3) experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, or being unable to work due to COVID-19.

  • Coronavirus-Related Distributions – A “qualified participant” may take a coronavirus-related distribution of up to $100,000 from an eligible retirement plan between January 1, 2020 and December 31, 2020. Eligible retirement plans include 401(k) and other profit sharing plans, 403(b) plans, government 457(b) plans and IRAs.

The 10% early withdrawal penalty does not apply to a coronavirus-related distribution. The distribution is taxable to the participant ratably over a three-year period, instead of all in the year of distribution. A participant can elect to repay the funds to the plan within three years and the taxable amount of the distribution will be reduced.

  • Increased 401(k) Loan MaximumThe maximum amount available for 401(k) plan loans taken between March 27, 2020 and September 23, 2020 by a “qualified participant” is doubled to the lesser of $100,000 or 100% of the participant’s vested account balance. The amount available is reduced by any other loans outstanding in the last twelve months.

Plan sponsors can choose to impose a lower loan maximum and may impose other limits that currently apply under a plan (minimum loan amounts, loans from only certain contribution sources, number of loans outstanding, etc.).

  • Delay in Loan Repayments – Loan repayment due dates between March 27, 2020 and December 31, 2020 may be delayed for up to one year for a “qualified participant.” Any subsequent repayment due dates may be adjusted to reflect the delay. The period of delay shall not be taken into account in determining the five-year term or repayment period of the loan.

Plans may begin taking advantage of these provisions immediately and do not need to be amended until the last day of the plan year beginning on or after January 1, 2022. 

Required Minimum Distributions NOT Required in 2020

Required Minimum Distributions (RMDs) from defined contribution plans (including 401(k), 403(b) and government 457(b) plans) and IRAs are waived for 2020 under the CARES Act.  RMDs that would otherwise been required to be made for those participants reaching age 72 during 2020 may be delayed until 2021. The delay does not apply to RMDs under defined benefit plans. Plans must be amended to reflect the waiver by the last day of the plan year beginning on or after January 1, 2022.

Biometric Data in the Days of Virtual Interaction and E-Learning

Contributed by Molly Arranz and Carlos Arévalo, April 7, 2020

Biometric Identification Personality, Scanning Modern Access Control, Technology Recognition Authentication System Concept – Illustration Vector

Due to COVID-19, everyone has been adjusting to daily life from home, including the youngest family members. Education is coming in the form of rapidly-developing technology that provides cybernetic classes and hangouts and the submission of coursework or “attendance” virtually. More businesses now have employees working remotely, using technology to stay in touch with co-workers and conduct meetings. However, this interfacing by schools, dance/music classes and management or team meetings may come with legal risk. The requirements of privacy laws, take, even the Illinois Biometric Information Privacy Act (BIPA) protection of “voiceprints,” are not being relaxed even in these unusual times. Any company should ask what consent and disclosures are in place before they engage in the next virtual connection.

A new class action lawsuit against Google, for use of the tech giant’s educational platform, highlights this challenge. There, a parent claims that Google violated BIPA by collecting voiceprints, facial features and other personal identifiers of children. Google is also being accused of violating the Children’s Online Privacy Protection Act (COPPA), which prohibits companies from collecting personal information from children under the age of 13 without parental consent. So while making remote working and learning resources available during this pandemic is undoubtedly necessary, companies must remember that federal and state privacy laws remain in full force.

If you are allowing for any recordings or interfacing that could involve facial or voice data, you should first:

  • Determine what biometric information you are collecting: Under BIPA, biometric data is sensitive information that is biologically unique—such as iris scans, fingerprints, voiceprints and face geometry. Some of these identifiers can be captured simply through voice or video recording, so think through what information your company may be collecting to determine any necessary disclosures.
  • Evaluate what disclosures you currently have in place: To comply with BIPA, companies must provide written notice to its users disclaiming what biometric information will be collected, stored, or used, as well as an explanation of the purpose of its collection and how long it will be kept. Additionally, prior to collection it is best to obtain express written authorization from consumers (students, employees, participants) to collect and store their biometric information.
  • Develop a publically available written policy: Along with obtaining express consent, it is important to incorporate a public policy establishing a retention schedule and guidelines for destroying biometric information.
  • Do not forget about federal regulations: While it may be difficult to keep up with the many changing state regulations, do not allow blanket federal policies to fall to the wayside. If you collect, use, or disclose any personal information from children under 13 years of age be sure to comply with COPPA by clearly posting privacy policies on your website or platform and obtaining parental consent. State privacy laws may add another layer of disclosure or consent. In fact, regardless of whether you interact with this age group, the Federal Trade Commission (FTC) and/or certain state laws recommend providing this disclosure as a precaution.

UPDATE – Does a “Shelter-in-Place” or “Stay-at-Home” Order Trigger Paid Sick Leave under the FFCRA?

Contributed by Jeff Risch and Peter Hansen, April 6, 2020

22175873 – a 3d human character a question mark

As we now know, the Families First Coronavirus Response Act (FFCRA) requires covered employers to provide employees with paid sick leave — under the Emergency Paid Sick Leave Act (EPSLA) — for specified reasons related to COVID-19 starting April 1. These reasons include: because the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19.

Many states and local governments have now mandated shelter-in-place (SIP) or stay-at-home orders.

The question facing many employers is whether these SIP orders trigger the paid leave requirements of the FFCRA.

The U.S. Department of Labor (DOL) published its FFCRA rules on April 6, 2020 providing a little more guidance on this issue. According to the DOL’s regulations: 

For the purposes of the EPSLA, a quarantine or isolation order includes quarantine, isolation, containment, shelter-in-place, or stay-at-home orders issued by any federal, state, or local government authority that cause the Employee to be unable to work even though his or her Employer has work that the Employee could perform but for the order. This also includes when a federal, state, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter-in-place, stay-at-home, isolate, or quarantine, causing those categories of Employees to be unable to work even though their Employers have work for them.

In light of this authority, employers who continue to operate and have work available at their place of business need to carefully review the unique SIP order(s) impacting their operations and determine if there is any information advising categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter-in-place, stay-at-home, isolate, or quarantine and thereby causing those categories of employees to be unable to work even though work is available.  Of course, if an employee is able and allowed to work from home, then the employee would not be eligible for paid sick leave under the EPSLA. 

Again, it is critical for employers to evaluate the SIP order(s) covering their geographic footprint(s). Using Illinois as an example, the current stay-at-home order states that, “People at high risk of severe illness from COVID-19, including elderly people and those who are sick, are urged to stay in their residence to the extent possible except as necessary to seek medical care.”  However, questions abound. Does Governor Pritzker “urging” certain residents to stay at home render them eligible for EPSLA benefits if they cannot work from home? Notably, St. Louis County (MO) issued its own stay-at-home order with language similar to Illinois, and released an FAQ providing, in relevant part: It is highly recommended that high-risk populations (like persons over 60 years old or persons with underlying health conditions) should stay at home. 

Bottom Line:  An employee should not be eligible for the paid sick leave under the EPSLA if his/her assigned worksite closes down pursuant to an SIP order, or if it closes for any other reason, such as lack of business. However, employers should note that when they continue to operate, any employee who cannot work from home may be eligible for paid sick leave depending on the applicable SIP order in place expressly advising the employee to stay home due to specific instructions/restrictions. 

Missouri Issues State-wide “Stay At Home” Order

Contributed by Brian Wacker, April 4, 2020          

black and white gavel

This blog has previously reported on Governor Parson’s resistance to issue a state-wide “Stay At Home” Order in Missouri in response to the COVID-19 pandemic.  He had previously issued a “Social Distancing” Order, effective through April 6, 2020, with individual counties and municipalities left to issue their own Stay At Home Orders to fill the void.

Now that has changed. 

On Friday evening, the Governor announced that the State’s Department of Health & Human Services had issued a state-wide Order mandating that all Missourians “shall avoid leaving their homes or places of residence unless necessary.”  The details of the 3-page Order, which is effective beginning on April 6, 2020 and remains in effect through Friday, April 24, 2020, are as follows:

Individuals Are Ordered To Stay At Home

Missouri residents are to avoid leaving home, except to work, access food, prescriptions, health care or other necessities or to engage in outdoor activity.  And if they must leave for such purposes, they are required practice “social distancing.”  The Order does also carve out individuals leaving home to go to and from their place of worship, but again provided that “social distancing” guidelines are adhered to. 

Individuals are specifically prohibited from visiting nursing homes, long-term facilities and retirement homes unless to provide critical assistance. Finally, individuals are to avoid social gatherings of more than ten people. Restrictions on eating and drinking at bars, restaurants and food courts remain, but those businesses can remain open for drive-thru, pickup or delivery. 

If individuals do leave home subject to the above restrictions, the dictates of the prior “Social Distancing” Order remain in effect. 

Businesses Can Continue To Operate, Subject To Restrictions

Notably, the Order does not require any businesses to shutter. Instead, it places restrictions on businesses based on whether they employ individuals to perform “essential worker functions,” as defined by U.S. Department of Homeland Security’s guidance. 

This DHS Guidance includes functions of workers employed in the following fields:

  • healthcare/public health;
  • law enforcement, public safety and first responders;
  • food and agriculture;
  • energy;
  • water/wastewater;
  • transportation/logistics;
  • public works/infrastructure support;
  • communications & IT;
  • community and government-based operations;
  • hazardous materials;
  • financial services;
  • chemicals;
  • defense industrial base;
  • commercial facilities;
  • residence care and shelter services; and
  • hygiene products and services.

Given the wide range of fields above and the various workers defined under each by the DHS, Missouri businesses should study the DHS’ guidance in detail and seek legal guidance if there is any question as to whether employees qualify.

Businesses with employees performing “essential worker functions”

For businesses with employees meeting this DHS definition and which engage in retail sales to the public, they are required to limit the number of people in the retail locations as follows:

  • for retail locations with less than 10,000 square feet, 25% or less of the local fire or building code occupancy; or
  • for retail locations with more than 10,000 square feet, ten percent or less of the local fire or building code occupancy.

The Order exempts workers performing “essential worker functions” and whose job duties require contact with other people closer than 6 feet from “social distancing” requirements.  However, for any retail establishment remaining open, the Order requires “social distancing” to be practiced “including, but not limited to, when customers are standing in line.”

Businesses without employees performing “essential worker functions”

If a business does not have employees performing “essential worker functions,” then it is subject to the following restrictions:

  • gatherings of ten people in a single space at the same time are prohibited; and
  • individual workers are to maintain six feet between them, except when those workers are family members.

Businesses without employees performing “essential worker functions” can request a waiver from the gathering restrictions from the State’s Department of Economic Development.

Missouri Schools Remain Closed

The Order specifically declares that Missouri schools shall remain closed. 

However, subject to the individual and business restrictions above, daycares, childcare providers and schools can still provide child care for working families if they follow guidelines published by the Centers for Disease Control.

Local Orders Remain Effective

Finally, the Order is clear that while it is effective state-wide, local counties and municipalities may enact separate orders or regulations to help combat the COVID-19 Order, so long as they are not inconsistent with the Order.

US DOL Releases Families First Coronavirus Response Act (FFCRA) Temporary Regulations and Updates FAQ’s

Contributed by Sara Zorich, April 3, 2020

The US Department of Labor (DOL) has posted its temporary regulations regarding the Families First Coronavirus Response Act (FFCRA).  The DOL is scheduled to post its published version on April 6, 2020.  The new regulations include parts 826.10 – 826.160 of the federal code and set forth the compliance requirements for employers with less than 500 employees for both the Emergency Paid Sick Leave Act (EPSLA) and the Expanded Family and Medical Leave (EFMLEA).

Additionally, the DOL continues to update its FFCRA FAQ’s and FAQ’s regarding posting requirements. At the time of this publication, those FAQ’s were most recently updated on April 2, 2020.

Employers subject to the FFCRA paid leave provisions must comply with these new regulations no later than April 1, 2020.  The DOL has a limited stay of enforcement regarding FFCRA compliance until April 17, 2020; however, the DOL has indicated that once it fully enforces the FFCRA, it will retroactively enforce violations back until the effective date of April 1, 2020, if employers have not remedied the violations.

As a reminder, employers covered by the FFCRA must post the following poster in a conspicuous place on its premises which can be satisfied by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website. 

The FFCRA rules are complex and as COVID-19 stay in place orders, quarantines and directives change, those changes will impact an employer’s FFCRA compliance requirements.

DOL: FFCRA Leave Can Be Taken Intermittently By Agreement Of The Employee And Employer (In Some Circumstances)

Contributed by Brian Wacker, April 2, 2020

The Department of Labor has issued Temporary Regulations on the Families First Coronavirus Response Act (FFCRA) to address an issue already causing employers fits – namely, can employees use paid sick leave under the Emergency Paid Sick Leave Act (EPSLA) and expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act (EFMLEA) intermittently?  

According to the DOL: it depends. 

The employer and employee must agree to intermittent leave.

First and foremost, the regulations are clear that “one basic condition” applies to all employees who seek to take leave under the FFRCA: “they and their employer must agree.” Without such an agreement, leave cannot be taken intermittently. While there is no requirement of a written agreement, it is advisable to have one.  Because the DOL has said that in the absence of a written agreement to intermittent leave, “there must be a clear and mutual understanding between the parties.”  In addition, the agreement must also be certain as to the increments of time in which the leave is taken intermittently. 

If the employer and employee agree to intermittent leave, when is it permissible under the FFCRA?

Intermittent leave is not permissible in all situations. 

If the employer and employee agree that the employee may telework (e.g., working from home), the employee is permitted to take intermittent leave (paid leave and/or expanded family or medical leave) in any agreed increment of time. This regulation is drafted intentionally broad to give employers flexibility to balance the needs of the teleworking employee and the “needs of the employer’s business.”

However, if an employee is still working at the employer’s jobsite, intermittent leave can only be taken “in circumstances where there is a minimal risk that the employee will spread COVID-19 to other employees at an employer’s worksite.” Therefore, the regulations allow an employer and employee reporting to a worksite to “agree that the employee may take paid sick leave or expanded family and medical leave intermittently solely to care for the employee’s son or daughter whose school or place of care is closed, or whose child care provider is unavailable, because of reasons related to COVID-19.” 

However, intermittent leave is prohibited for employees who report to an employer’s worksite – even if the employee and employer agree – if the leave it being taken for any of the following reasons:

  • because the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19;
  • because the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • because the employee is experiencing symptoms of COVID-19 and is taking leave to obtain a medical diagnosis;
  • because the employee is caring for an individual who either is subject to a quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  • because the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

According to the Regulations, in these situations, intermittent leave is prohibited due to the “unacceptably high risk that the employee might spread COVID-19 to other employees when reporting to the employer’s worksite.”  So once an employee starts taking leave for any of these reasons, she must continue to take it until either the entire amount of provided leave is taken or until she no longer has a qualifying reason to taken leave.

Finally, the Regulations clarified that when permissible intermittent leave is agreed to by the employer and employee, “only the amount of leave actually taken may be counted towards the employees leave entitlements.” This means that if an employee returns from leave prior to expiration of their leave entitlement under the FFCRA, they are still entitled to use the remaining leave entitlement for a separate qualifying reason and are not otherwise prohibited from doing so by the Intermittent Leave regulations.

Prior to the issuing the regulations, the DOL issued guidance on these issues, which is consistent with the regulations, which can be found on the DOL website.

WARN Act and its Implications for COVID-19 Layoffs and Furloughs

Contributed by John Hayes and Carlos Arévalo, April 1, 2020

gavel on white backgruound

The federal Worker Adjustment and Retraining Notification (WARN) Act and the patchwork state-law equivalents are often overlooked when employers are considering their options regarding potential layoffs or furloughs – either permanent or temporary. Employers should be cautioned that not abiding by the requirements of the WARN Act could lead to problems down the road.

The WARN Act requires employers with 100 or more employees to give an advance 60-day written notice to its displaced workers, certain third parties, and government bodies notice for a plant closing or mass layoff. A plant closing means the permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss of 50 or more employees during a 30-day period. A mass layoff means a reduction in force that is not the result of a plant closing which results in either an employment loss of 500 or more employees, or an employment loss of at least 50 or more employees and at least 33% of the active workforce at the site during a 30-day period. This 30-day period may be increased to 90 days if there is a series of small employment loss events that do not individually meet the threshold numbers above. We should also note that part-time employees (those working less than 20 hours a week) and those who have worked less than 6 of the previous 12 months are excluded from the calculation of affected employees. Under federal WARN, temporary layoffs of less than 6 months are not counted as an employment loss. 

The DOL guidance on the WARN Act can be found on the DOL website.

Given the current circumstances, an advance 60-day notice will likely not be possible for most employers. The WARN Act contains three exceptions to the advance notice requirement, the applicable one currently mostly likely being the “unforeseen business circumstances” exception. While this exception may apply to COVID-19 — and this, the 60-day advance notice would then be excused, notice is still required to be given in the event of a plant closing or mass layoff. Also, as more time passes, the “unforeseen business circumstances” exception is likely weakened.

The available penalties under the WARN Act are not insignificant and include the possibility of potential class action suits. An employer who violates WARN is liable to each affected employee for an amount equal to back pay and benefits for the period of violation, up to 60 days. Moreover, an employer who fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation. In any suit, the court, in its discretion, may allow the prevailing party a reasonable attorney’s fee as part of the costs.

While the above discusses the federal WARN Act, it is important to note that several states have their own “mini-WARN” laws that may impose different or more strict requirements, may not include the “unforeseen business circumstances” exception or other exceptions, may encompass a different employee count, and/or may consider temporary/short lay-offs as triggering notice requirements. For example, New York requires advance notice of 90 days. Illinois requires employers with 75 or more employees to give notice, as opposed to the 100-employee trigger under federal law.   

The Bottom Line: Out of an abundance of caution employers should consider sending out WARN notices to their employees, third parties (as applicable), and the relevant government authorities in the event of a plant closing, mass layoff or furlough, even if temporary. Any business contemplating closures or layoffs or furloughs (either long or short-term) of a significant number of employees should seek advice and counsel from competent employment and labor law counsel. The risks are just too great!