The enormous financial strain on plan participants and their families may mean that more members of your workplace community could benefit from an EAP. You may want to ensure that those doing the counseling through your EAP are informed about your workplace’s ability to implement changes that would allow participants to make this COVID-19 hardship withdrawal.
Earlier, we prepared an FAQ on how plan sponsors can use the CARES Act provisions to help their employees. This is one of a series of articles focused on the CARES Act. These articles expand on that information and we urge plan sponsors to review those FAQ and discuss with their leadership teams.
This article will focus on who is involved in the CARES Act’s provisions concerning retirement plans. As we’ve discussed in the other articles in this series, concerning what is covered by the CARES Act and how that might change a plan sponsor’s workflow, the CARES Act may have some unexpected changes to a plan sponsor’s method of operating. Right now, nearly everything seems unpredictable. The focus of this article is to consider who might need to be involved in implementing the new provisions of the CARES Act for your plan participants. As you’ll see, your workplace’s human resources, legal team, EAP, recordkeeping, information technology and facilities management teams will need to work together on this topic.
First, as we noted in the article concerning how the CARES Act might change a plan sponsor’s workflow, the provisions that allow a withdrawal from a plan participant’s account detail that the plan participant must have been “diagnosed with COVID-19, or the individual suffered adverse financial consequences due to COVID-19 (e.g., furlough, reduction in hours, unable to work due to childcare, loss of business, etc.).” As to the economic impact of the COVID-19 response, those matters may not require any different record keeping than for a hardship withdrawal. However, record keeping concerning health information may require different staff members and their expertise. In other words, in terms of implementing this special circumstances different individuals may be involved at your workplace.
The Health Insurance Portability and Accountability Act of 1996, also known as HIPAA, does allow for some information to be shared in the workplace about an employee’s COVID-19 health status. Your workplace may already be considered a covered entity for HIPAA if your workplace provides a certain level of administration of its health care plan. However, just for the purposes of focusing on the retirement portions of the CARES Act, this article will assume your workplace is not such a classified entity.
Normally, HIPAA and other regulations, like the Americans with Disabilities Act, require that health information be kept separate from an employee’s file. However, eligibility for retirement plan withdrawals, vesting and other aspects of employee benefits may need to be reviewed alongside COVID-19 related health information. This means those that maintain employee files and those that address employee benefits, to the extent they are not already, may need to work more closely in the future. Public health agencies may already have asked employers to investigate potential exposure of employees in the workforce. Those investigations are often performed by your facilities department. That information is also to be treated as confidential information protected by the ADA and potentially state health information protection laws. Given that the ADA and HIPAA and other laws are involved this may mean that your workplace’s legal counsel should probably be regularly consulted about employee record retention and about policies to implement the CARES Act. Your information technology group may need to be more involved in these conversations too as maintaining a high level of confidentiality while some employees work remotely could require new work plans, such as changes to an enterprise cloud or new levels of security on a virtual private network.
As we noted in the FAQ prepared and published earlier, plan sponsors that want to implement portions of the CARES Act concerning retirement should contact their Plan Account Manager so that they can, after receiving written instructions, take the appropriate steps to implement the provisions and will prepare the necessary amendments for your plan within the required time frame.
Finally, the enormous financial strain on plan participants and their families may mean that more members of your workplace community could benefit from an Employee Assistance Plan or EAP. If your EAP group does not currently offer financial counseling, you may want to consider expanding it. And, if it does offer financial counseling, you may want to ensure that those doing the counseling through your EAP are informed about your workplace’s ability to implement changes that would allow participants to make this COVID-19 hardship withdrawal.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, advisors and plan sponsors should consult with their compliance, finance and legal teams. The information here reflects a summary of our current understanding of certain provisions in the CARES Act. There are other significant changes in the CARES Act that may impact your business. As with any new law, the CARES Act’s meaning is subject to further clarification and change, as many questions are yet to be answered. Clients should consult with their tax and legal advisors regarding their specific situation.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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