On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act introduced the Employee Retention Tax Credit (ERTC), a new tax credit to incentivize employers, who are economically distressed due to COVID-19, to retain employees.
There are three COVID-19 related tax credits that were introduced under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which are subject to various limitations:
- Emergency Paid Sick Leave Act tax credits – a dollar-for-dollar tax credit for qualifying wage payments of emergency paid sick leave;
- Emergency Family and Medical Leave Expansion Act tax credits – a dollar-for-dollar tax credit for qualifying wage payments of family leave; and
- The Employee Retention Tax Credit – a tax credit equal to 50% of qualifying wages payments made to employees.
On March 18, 2020, the Families First Coronavirus Response Act (FFCRA) was signed into law requiring employers with fewer than 500 employees to make payments for COVID-19 related FLMA leave and paid sick leave required by the Act. To lessen this financial burden to employers, the act provides for refundable tax credits to offset payroll taxes. The FFCRA tax credits will be provided for eligible wages paid from April 1, 2020, to December 31, 2020.
The spread of COVID-19 and the resulting disruption to the economy has led many employers to think creatively about how to manage cash, provide for the sustainability of their businesses and preserve the culture they have created with their employees and customers. These issues are especially critical for employee stock ownership plan (ESOP) companies, many of whom are in the process of their annual appraisal. These appraisals are important because they directly affect the size of the repurchase obligation – the cash companies must pay to participants for their distributions and diversifications during the year. Fortunately, there are some tools that ESOP companies may be able to utilize. This blog will describe ERISA fiduciary and other strategies ESOP companies can consider with respect to valuations and the related cash management needs those valuations will create.
This post was updated on April 7, 2020. Please read the update here.
On March 18, 2020, the Families First Coronavirus Response Act (FFCRA) was signed into law requiring employers with fewer than 500 employees to make payments for COVID-19 related FMLA leave and paid sick leave required by the act. To lessen this financial burden to employers, the act provides for refundable tax credits to offset payroll taxes. The FFCRA tax credits will be provided for eligible wages paid from April 2, 2020 to December 31, 2020.
We have all felt the tremendous impact to our workplaces and daily lives following the COVID-19 outbreak We’ve also watched the daily press conferences announcing new legislation and executive orders–but what happens next?
My colleagues Leigh Ann Benedic and Mike Underwood hosted a discussion on effects of the Family First Coronavirus Response Act (FFCRA) on employers, state law developments and provide answered to frequently asked questions that will help you manage your workforce effectively through these unique times. Click here to watch the webinar recording.
This program was recorded on Monday, March 23, 2020 and may not reflect updates in regulations after that date.
Unintended consequences are a fact of life. As one of many examples, after the Titanic sank, the United States enacted a law that required any American ship carrying over 100 tons of weight to have enough lifeboats for every passenger. It was a noble thought – no more rationing of lifeboats in the event of a future ship wreck. Unfortunately, the SS Eastland was a poorly designed ship. The additional lifeboats required by the new law added enough weight to cause the ship to roll over not too far away from shore. Some passengers were able to step on to dry land, but others were trapped as the ship took on water, leading to an unintended tragedy.
We may be seeing a similar (but far less tragic) example of unintended consequences play out in the executive compensation arena. In 2004, Section 409A was added to the Internal Revenue Code to restrict the ability of nonqualified plan participants from canceling their deferral elections and accelerating payment. Section 409A and other corporate reforms also restricted the ability to accelerate stock options and revise incentive plan performance goals and payouts.
As more test kits become available for COVID-19 and an increasing number of people are tested, there will be more positive diagnoses. Because of COVID-19’s rapid community spread, many employers will soon see positive diagnoses of their own employees. If an employee tests positive for COVID-19, an employer may want to limit workplace exposure by notifying its other employees of the positive diagnoses.
There have been a number of helpful blogs recently from our colleagues at Porter Wright aimed at helping businesses navigate the COVID-19 outbreak.
Navigating Employment Issues in the Wake of COVID-19 webinar
We have all felt the tremendous impacts to our workplaces and daily lives following the COVID-19 outbreak We’ve also watched the daily press conferences announcing new legislation and executive orders, but what happens next?
As your workplace adapts to growing restrictions, Porter Wright invites you to a live webinar on Monday, March 23, 3:00 – 4:00 pm with Porter Wright’s Leigh Ann Benedic and Mike Underwood. We will discuss the effects of the Family First Coronavirus Response Act on employers, state law developments and provide answers to frequently asked questions that will help you manage your workforce effectively through these unique times.
We will also be taking some of your questions as time permits. This webinar has limited capacity, so please register today!
Financial assistance for small businesses amidst the COVID-19 outbreak
Across the country, state governments are ordering the indefinite closure of bars, restaurants, gyms, and other indoor spaces that may contribute to the community spread of COVID-19. At the same time, pending federal legislation may add additional financial burdens to small businesses that remain open and continue to operate. To help navigate potential sources of financial relief for small businesses, helpful information was curated by Porter Wright’s Victoria Hanohano-hong.
Read the full post on the Banking & Finance Law Report Blog.
UPDATE: Treasury delays April 15 tax filing and payment deadline
In response to the COVID-19 pandemic and the increased strain placed on individuals and business taxpayers during this time, the IRS has pushed back certain payment deadlines to ease the burden on taxpayers. Porter Wright’s Cassandra Rice and Gary Schulte explain the plan that impacts any person with a federal income tax payment due April 15, 2020.
Read the full post on the Banking & Finance Law Report Blog.
On Oct. 23, 2019, the Department of Labor (DOL) released a proposed rule for electronic delivery of ERISA disclosures. Although the DOL already allows for electronic delivery under the 2002 Electronic Safe Harbor, its availability is limited and technology quickly outpaced its usefulness. The proposed rule creates a new, additional safe harbor the DOL calls the “Notice and Access” safe harbor that will allow for electronic delivery as a default method of delivery for certain ERISA Title I disclosures. At this point, the safe harbor applies only to ERISA-governed retirement plans, and does not reach health and welfare benefit plans, though the DOL reserves a section in the proposed regulations for potential future application to required disclosures for such plans.
How does it work?
First, the plan administrator must notify all participants and beneficiaries that the default method of delivery for plan disclosures will be changing. Naturally, this initial notice must be furnished on paper, even for participants who currently receive disclosures under the 2002 safe harbor. The notice must also allow participants the opportunity to opt out of electronic delivery.
Second, administrators must provide an electronic “notice of internet availability” for each ERISA disclosure at the time the disclosure is made electronically available to the participant. The DOL requires the notice to:
- Be furnished on its own, separately from any other notice
- Contain certain language describing the document covered and its URL
- Allow the participant to opt out of electronic delivery or request a free paper copy
- Be written in a manner calculated to be understood by the average participant
Although the notice of internet availability must be furnished on its own, , that notice itself can apprise participants and beneficiaries of the availability of multiple ERISA disclosures.
Third, the administrator must make the ERISA disclosure accessible on a secure website. The disclosure must be available to the participant by the time it must be furnished under ERISA and must remain there until it is superseded by a subsequent version of that disclosure. The ERISA disclosure must, essentially, be available to participants as a word-searchable, downloadable, and printable PDF.
Who and what is covered by the safe harbor?
Unlike the 2002 safe harbor, which was available only to employees who were “wired at work” or participants who affirmatively consented to electronic delivery, the “notice and access” safe harbor will be available to all participants, beneficiaries, and any other individuals that are entitled to the covered documents. The only requirement is that the individual provide the administrator with an electronic address or internet-connected mobile-computing-device number (i.e., an email address or a smartphone number), or be provided an electronic address by the employer.
The proposed safe harbor will cover documents that are required to be furnished to participants under ERISA Title I, except for any document that is furnished only upon request. This means any document that must be furnished solely because of passage of time or a specific triggering event is included. This includes the following documents:
- Summary plan descriptions
- Summaries of material modifications
- Summary annual reports
- Annual funding notices
- 404a-5 investment-related disclosures
- Qualified default investment alternative notices
- Blackout notices
- Pension benefit statements
Surely, somewhere, the Lorax is crying tears of joy.
What can plan administrators do?
Right now? Nothing. The “notice and access” safe harbor won’t be effective until 60 days after the final rule is published and the DOL is not allowing reliance on the proposed rule, on which the DOL is seeking public comment through Nov. 22, 2019. After the safe harbor rule is finalized and effective though, plan administrators will be able to greatly expand their use of electronic distribution of documentation (or gain more comfort in the processes they might already be following).
The beauty and danger of the DOL proposed rule is that it is purposely and purposefully broadly-worded to allow for innovations in technology. For instance, the requirement that the participant have an email address or a smartphone number allows for creative methods of notice: Email? Text? In-app or push notifications? So long as the safe harbor is met, it would seem all of the above are acceptable to the DOL. But just because you can do something, doesn’t mean you should. To avoid DOL scrutiny, administrators should be careful not to push participants past their technological comfort zones.
And although the proposed rule requires an initial notice that a plan is changing its default notice method, expect a rough transition. As plan administrators (and the Supreme Court) know, just because a participant receives a notice, doesn’t mean they’ve read it or even opened it. This means many participants will not be aware of the change to electronic disclosures until they realize they haven’t received a paper notice in a really long time. To ease the transition, in addition to the required paper notice, plan administrators should consider notifying participants using every method they currently use to communicate with participants (e.g., website pop-ups, website banners, direct messaging, texts, email, etc.). But, at the very least, this is progress.