This week we took a deeper look into participant's self-certification that they are eligible for relief under the Act, as well as the option some service providers are taking to automatically implement CARES Act provisions for any plan that does not affirmatively opt out. For answers to more questions about The CARES Act or other ongoing effects of the coronavirus, visit our FAQ page.
There are differences of opinion on this point. You are absolutely correct that, as a general rule, there are numerous employment-related laws that prohibit employers from asking employees about health conditions. There are some that point to those laws as being absolute and suggesting that it would be a violation to require an employee to disclose a COVID-19 diagnosis. That conclusion supports a more general self-certification in which the employees simply confirms that they meet at least one of the requirements without specifying which one.
Others conclude that because the CARES Act specifically makes this one of the conditions for a participant to be able to take coronavirus-related distribution or quality for the loan relief (described below), it is acceptable or maybe even mandatory for a company to require the employee to self-certify as to which criteria he or she meets. In further support for this interpretation, some point to the Department of Labor’s temporary regulations related to the paid leave provisions of the Families First Coronavirus Relief Act. (See page 50 of the linked document). It spells out that one of the items an employee must provide in order to be eligible for that relief is documentation of “the COVID-19 qualifying reason for leave.” Since one of the qualifying reasons is being diagnosed, this regulation very clearly contemplates that a diagnosed employee would be required to disclose that.
We are aware of recordkeepers, financial institutions, and attorneys who have come down on both sides of this discussion. That is all a long way of saying that there is no clear, agreed-upon answer here. If you are unsure how to proceed in this regard, please consult your HR or legal counsel.
This industry has never experienced anything quite like the current environment, and everyone is trying to balance making as much relief as possible as quickly as possible with the fact that this is still a highly regulated environment. While Congress has made it easy to implement the CARES Act relief right away, there are a number of downstream responsibilities that plan sponsors will have to take on once the dust settles.
The ability to temporarily suspend loan payments provides current relief. The other side of that coin is it will require a lot extra work at the end of this year when all of those loans will require accrued interest calculations and new amortizations to determine the new payment schedules. Not all plan sponsors will want to take on the responsibility of making sure that happens properly and timely. There are also plenty of businesses whose operations are continuing uninterrupted (or even growing). Companies in that situation might not want to make it too easy for their employees to drain their retirement accounts while they are still actively working.
These are some of the reasons that DWC is suggesting not only that companies somehow document their elections now (even though amendments won’t be required until 2022) but also that they engage in conversations with their service providers to understand the downstream implications of their current decisions. It’s not about slowing progress; it is about making sure that unintended consequences do not rear their ugly heads right at the time when many companies will be getting back on their feet.
We will continue to address your questions related to the coronavirus and The CARES Act each week. In the meantime, the DWC team is here to answer any questions you might have, not only about the Act but also how the current environment may impact your plan. If you are not sure who at DWC to contact, please reach out to one of the following:
- Doug Hoefer at 651.204.2600 ext. 101 or doug.hoefer@dwc401k.com
- Lori Reay at 651.204.2600 ext. 126 or lori.reay@dwc401k.com
Stay tuned and stay well!
