Newsletters

Associations, Nonprofits and Political Organizations Report - Fall 2021

Update Concerning Meetings and Related Issues in Light of COVID Variants and the Anime Convention

Just when some groups are feeling it is reasonably safe and practical to resume in-person meetings, the arrival of the Delta, Omicron and other variants likely to follow has greatly complicated meeting safety and risk management challenges.  Like the super spreader conferences that heralded the beginning of the pandemic in early 2020, last week there was widespread news that an attendee at a recent 3-day Anime convention in New York City tested positive for Omicron after returning home to Minnesota. As of December 3, about half of the man’s 35 friends he met up with at the conference have also tested positive for COVID (although it was not yet known if any had the Omicron variant). In addition to notification and contact tracing, state health officials have urged all 53,000 attendees to get tested, particularly those developing any symptoms. Although extreme, these actions set a high bar for what notice requirements might be expected for other groups in the future.

[Note: Given continued uncertainty about the future of the pandemic, our general cautions and advice about COVID meeting issues remain the same as our earlier reports:  Legal Issues for Meetings: Lessons Learned and Planning Ahead (ASAE Associations Now April 2021); and Shore Up Your Meeting Contracts in Uncertain Times (ASAE Associations Now September/October 2017).]

If you have resumed in-person meetings, big or small, what are the mandatory state and local requirements that must be followed and what additional safety rules would you like to adopt (if allowed)? Are you including assumption of risk and liability waiver provisions in your registration materials? Do you require attendees to commit to a meeting code of conduct which includes compliance with COVID safety rules? Will you be enforcing whatever safety rules you adopt and announce to your attendees? What are your notification responsibilities if one of your attendees informs you that they tested positive for COVID after returning home?

The most important thing for any in-person meeting is the safety of attendees. From a legal perspective, what can be done to minimize potential claims and liability if someone tests positive after returning home from your meeting? Apart from legal liability, your reputation with your members and the general public may be enhanced or damaged depending upon whether your meeting was held safely without incident or was a super spreader event.
As your meeting date approaches, it will be important to determine what minimum vaccination, testing, masking, social distancing and other safety rules have been established by your meeting venue as well as local, state and federal guidelines. It also will be important to consider the expectations of your attendees, who may desire increased protections if allowed in that jurisdiction. Whatever they may be, your final safety rules should be committed to writing, formally announced, and made a condition of attendance. Many groups incorporate them into a formal meeting code of conduct.

In addition to keeping everyone as safe as possible, making attendees review and agree in advance to abide by your safety rules, acknowledging the risks of attending, and waiving potential liability can help set expectations and minimize claims. This can be in your meeting registration materials, which can also address whether a refund will be provided if someone refuses to follow the meeting or venue’s safety procedures. There should be similar requirements for exhibitors, vendors and guests.

Having all of this in writing will help protect you legally if your rules are followed. However, it also can form the basis for liability if you don’t enforce your rules, since it can be argued that you breached the safety promises you made to attendees by announcing the rules in the first place.  For example, there were anecdotal reports that the Anime convention was overcrowded, understaffed, vaccine cards and test verifications were not being checked carefully, and masking requirements were not being fully enforced. This certainly does not read well in the press and will not be helpful if a claim is made.  For most meetings, photos and videos will provide graphic evidence of what actually transpired including during sessions, receptions, meals, and informal gatherings.

After your meeting is over, no news is good news when it comes to COVID. Unfortunately, however, you may receive a report from one or more of your attendees that they tested positive upon their return home. As always, your first consideration will be the health and safety of the reporting individual as well as the other attendees at your meeting.  Certain actions may also be helpful or required to minimize your legal exposure.

The first step is information gathering:
 

• When did the attendee test positive in relation to your meeting dates and what were the likely other sources for infection (such as at home before or after your meeting, while traveling, or engaging in other activities at the meeting destination)?
• What was the size and where was the location of your meeting?
• What was the level of infection in that community at the time of the meeting?
• What were your meeting rules as discussed above and were they enforced by you and followed by the infected person?
• What kind of acknowledgement and waiver, if any, did the individual and others sign in advance?

 
Needless to say, your action plan will be different if you are talking about a small versus a large meeting and if held at an isolated resort location or in a big city.  Your meeting venue and local health officials may have suggestions or requirements for you to follow in terms of notices and follow up. You should check these out prior to the event and be prepared to follow them if required or advisable. As in the case of the Anime convention, health officials may require full notification to all attendees, exhibitors, speakers and staff and a suggestion for universal testing if the positive test is for Omicron or some other new variant of concern. Again, these authorities should be consulted whatever the outcome of the reported positive test.

In almost all cases, it will be important to advise the reporting attendee to immediately contact any individuals with whom they were in direct contact during the meeting.  In some cases, the individual may self-report on social media out of consideration to other attendees. If not, and rumor gets out that someone tested positive, you should not give out the individual’s name without permission. If the infected attendee is not willing to contact others, you might need to perform contact tracing in order to notify those you know who came in close contact with the infected attendee that they might have been exposed to Covid.  If the infected attendee is not willing to contact others – or if they cannot recall who they came in contact with - this is all the more reason for a general notice to everyone who was at the event.

For a small meeting in a distant location, it might be appropriate to provide a general notice to all attendees.  Even for meetings in large cities and venues, notice to all attendees is desirable as a courtesy to your attendees. Although some city health authorities recently indicated that notice was not required for large meetings in a big city, the rationale was that COVID was widespread, contact tracing was impossible, and everyone understood the risk of attending and would watch for symptoms. Such guidance may be different depending upon the spread of Omicron or a future variant.  It is always best to check with the local health authority in the city where the event was held to seek appropriate guidance.

Finally, it is important to remember that both CDC vaccination cards and PCR test results include confidential information about individuals.  If you collected copies of meeting attendees’ CDC vaccination cards or negative PCR test results, these should be destroyed once you have noted whether meeting attendees were vaccinated or presented a negative test result.  Such information should not be collected or checked if your meeting was in a state, county or city that prohibited requiring meeting attendees to be vaccinated, masked, or present negative PCR tests.  If you have done so and your organization received a notice of a fine for mandating such protections, you should consult legal counsel as to your options for responding to the fine or other violation notice.

In conclusion, the continued spread of the Delta variant and emergence of the Omicron variant poses increased challenges for groups holding in-person meeting to keep attendees safe, minimize legal risks of claims and liability, and follow up with appropriate notices after checking with local health authorities if any attendee reports a positive COVID test after returning home.

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Retirement Plan Update: What Plan Sponsors Are Seeing and What is Coming

If your association or organization sponsors one or more retirement plans, you should be on the lookout for outreach from your recordkeepers or plan document providers.  Please note that many times the outreach comes through the providers’ employer portal with a corresponding email to the contact of record.  You should verify that the designated contact person is correct.  Failure to adopt the amendments described below in a timely manner may result in assessment of penalties by the Internal Revenue Service or disqualification of the retirement plans.   

Plan Amendments

The United States Congress has been relatively quiet over the last decade with respect to the passage of legislation impacting qualified retirement plans.  The days of retirement plan sponsors having to adopt amendments for required changes to retirement plans each year appeared to be behind us.  However, recent activity will necessitate upcoming amendments to retirement plans.  You can expect outreach from your recordkeepers or document providers on amendments for the following:
             

• Permanent change in “required beginning date”:  For individuals who reach age 70-1/2 after December 31, 2019, the new required beginning date for minimum distributions required to be taken from retirement plans and individual retirement accounts is now April 1 of the calendar year following the year in which the individual reaches age 72. 

• Temporary suspension of minimum distribution for 2020:  In response to the COVID-19 pandemic and the resulting negative impact on the stock market, Congress voted to suspend the requirement for employees or IRA owners to withdraw minimum required distributions from defined contribution plans, 403(b) plans, and individual retirement accounts.  Even though the waiver applies for 2020, a plan amendment is not required to be adopted until 2022.
• Accelerated distributions after death:  Retirement plan accounts must be distributed in full within ten years following a participant’s or IRA owner’s death unless the beneficiary is the participant or IRA owner’s surviving spouse or disabled child.  The previous rule was distribution in full within five years unless an election was made to utilize a payout over life expectancy.  Note:  this change may also have estate planning implications for plan participants.           
• Coronavirus-related distributions and loans:  Employers who elected to have the special “coronavirus distributions,” increased loan limits, and temporary suspension of loan repayments apply for their retirement plans will be presented with amendments to tailor the plan’s provisions to those elections. 

Plan Restatements

Organizations that utilize a prototype or volume submitter document for their retirement plans –- most plan sponsors – are now being presented with restatements of those documents, even if the organization has made no changes to its retirement plans.  You may be questioning whether these restatements are necessary, whether the document provider is just generating fees, and why you need to go through this exercise.  Answer is that the Internal Revenue Service requires these types of plans to be restated every six years even if the plans have not been amended since the last restatement. 

More bad news.  Due to the timing of the preparation of the restatements and the providers’ submission to the IRS for opinion letters, the amendments described above are not included in the restatements, so separate amendments will be sent even though the organization recently adopted new plan documents. 

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ESG Investing – Was Sort of Allowed, Was Disallowed, Now Allowed Again?

Retirement plan sponsors that allow participant direction of investment (most 401(k) plans) have a fiduciary duty to select and monitor the investments in the plan’s line up solely in the interest of participants and beneficiaries. 

Many employers, listening to the requests of employees, added or considered adding investment options in a retirement plan that consider “environmental, social, and governance” aspects of a particular company in the fund’s portfolio.  The Department of Labor’s prior advice was that ESG factors could be used as a “tie-breaker” among investment alternatives that were otherwise comparable in terms of the financial factors used to determine suitability of the option. 

The Department of Labor issued a final rule in October 2020 discouraging the use of funds that include ESG considerations providing that plan fiduciaries may only use nonfinancial objectives when evaluating investment options in limited circumstances.  If an ESG option was selected, the fiduciaries would have to document: 
 

• why financial factors were not sufficient to select or monitor the investment
• how the selected investment compares to the alternative investments with regard to certain specified investment consideration factors; and
• how the chosen non-financial factor or factors are consistent with the interests of participants and beneficiaries under the plan

The final rule essentially precluded any fund with ESG attributes to be a component of a qualified default investment alternative.  This final rule left plan sponsors in a quandary on whether they needed to eliminate previously-selected ESG investments from their fund lineups. 

In October 2021, the Department of Labor issued a proposed rule eliminating, in large part, the prior administration’s rules regarding ESG investments.  In the preamble to the final rule, the Department noted that it “. . . does not view collateral benefits [of ESG investments] as being presumptively illegal, provided that the investment at issue is otherwise selected in accordance with ERISA's duties of prudence and loyalty.”  Rather, a prudent fiduciary may consider any factor in the evaluation of an investment or investment course of action that, depending on the facts and circumstances, is material to the risk-return analysis, that might include, for example:
 

• Climate change-related factors, such as a corporation's exposure to the real and potential economic effects of climate change;
• Governance factors, such as those involving board composition, executive compensation, and transparency and accountability in corporate decision-making; and
• Workforce practices, including the corporation's progress on workforce diversity, inclusion, and other drivers of employee hiring, promotion, and retention; its investment in training to develop its workforce's skill; equal employment opportunity; and labor relations.

The proposed rule does not preclude the use of ESG investments in a qualified default investment alternative. 

Notwithstanding the apparent blessing of ESG investments, generally, a fiduciary may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives, and may not sacrifice investment return or take on additional investment risk to promote benefits or goals unrelated to interests of the participants and beneficiaries in their retirement income or financial benefits under the plan.

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Meet the Team: Attorney Spotlight

Eileen Morgan Johnson has been one of the co-chairs of our section since 2011. She represents membership organizations, professional and trade associations, and other nonprofit organizations. Eileen has a particular interest in nonprofit governance and is a frequent author and speaker on improving the quality and functioning of nonprofit boards. She is a past chair and current member of ASAE’s Legal Advisory Council and a past member of ASAE’s Consultants Section Council, the ASAE Foundation Development Committee, and the ASAE Innovation Grants Program Committee. Eileen is one of the few attorneys who is also a certified association executive (CAE). She gives back by mentoring students for the CAE exam.

When not working, Eileen enjoys hiking, visiting wineries, and travel. She is a true Disney Princess, having participated in the Disney Princess races in costume with her daughter for the past 4 years. Her recent travels included a river cruise in Bordeaux (biking and hiking through villages and vineyards), hiking Machu Picchu and other historic sites in Peru, and hiking, snorkeling and kayaking in the Galapagos Islands of Ecuador.