Monthly LRA Update

LEGISLATIVE DEVELOPMENTS

COVID-19 Legislation

In March, Congress passed three separate laws related to the COVID-19 pandemic:

1. March 6 – the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6074)
2. March 18 – the Families First Coronavirus Response Act (H.R. 6201)
3. March 27 – the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (commonly referred to as “Phase Three COVID-19 legislation”).

To our knowledge, and based on a preliminary review, none of these laws have direct implications for BOLI programs.

Below, we briefly identify a few provisions under the Phase 3 legislation that may impact employee benefit programs and bank regulatory changes that may be of interest to some of our readers.

• Exclusion for Certain Employer Payments of Student Loans: Under Section 2206 of the Phase 3 legislation, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.
• Over-the-Counter Medical Products without Prescription: Section 3702 of the Phase 3 legislation allows patients to use funds in HSAs and Flexible Spending Accounts for the purchase of over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription from a physician.
• Bank Regulatory Provisions

• Section 4011 temporarily amends the national bank lending limit to an individual borrower to allow the OCC to waive the limit on loans and other extensions of credit to nonbank financial companies.
• Under Section 4012, the Community Bank Leverage Ratio will be temporarily set at 8% (instead of the previous 9% level).
• Section 4014 provides optional, temporary relief from Implementation of FASB’s ASU 2016-13 (“CECL”).

REGULATORY DEVELOPMENTS

Federal Reserve Board Issues Final Rule Establishing Stress Capital Buffer Requirement Intended to Simplify Capital Framework

On March 4, the Federal Reserve Board (FRB) issued a press release regarding its adoption of a final rule intended to simplify its capital framework while maintaining strong capital requirements already in place. The rule was published in the Federal Register on March 18.

The final rule will remove the current 2.5 percent of risk-weighted assets component of a firm’s capital conservation buffer requirement and will replace it with a directive that the results of supervisory stress tests be used to establish a firm’s stress capital buffer (“SCB”). This will allow for integration of both CCAR and the FRB’s regulatory capital rules. It is intended to “remove redundant elements of the current capital and stress testing frameworks that currently operate in parallel rather than together.”

The final rule will apply to bank holding companies and U.S. intermediate holding companies of foreign banking organizations with more than $100 billion in total consolidated assets. It will be effective on May 18, 2020, with a firm’s first SCB requirement to be effective October 1, 2020.