In the wake of hurricanes Harvey, Irma, and Maria, federal agencies are throwing victims a number of lifelines in the form of pension and benefits relief.
The IRS, Labor Department, and Pension Benefit Guaranty Corporation have all announced changes to their usual compliance and enforcement regimes that will allow employers and employees some wiggle room in the aftermath of the storms.
At Bloomberg BNA, we’ve been covering individual announcements by the agencies as they’ve come out. This blog provides an outline of hurricane-related relief gathered in one place for your convenience.
Some of the measures discussed below are specific to a particular hurricane and location, except for the relief compiled by the IRS on Sept. 26 in IR-2017-160, which applies to individuals and businesses in Florida, Georgia, Puerto Rico, the Virgin Islands, and parts of Texas.
Many of the same forms of hurricane-related relief have since been packaged into a piece of legislation called the "Disaster Tax Relief and Airport and Airway Extension Act of 2017" that was signed into law Sept. 29 by President Donald Trump. Title V of the new law, H.R. 3823, Pub. L. 115-63, provides special disaster-related rules for use of retirement funds by individuals and businesses in areas affected by Hurricanes Harvey, Irma, and Maria, including provisions regarding early withdrawals and loans from retirement plans.
IRS Relief Granted
The IRS in a series of pronouncements loosened rules in order to allow money to go to hurricane victims and provide extra time to meet certain pension deadlines and filing requirements.
• Leave-Based Donation Programs. Employers and employees in all the affected areas can participate in employer-sponsored leave-based donation programs to aid hurricane victims. The programs allow employees to trade in their vacation, sick, or personal leave for cash payments by the employer to charities providing relief to hurricane victims. “Donated leave is not included in the employee’s income, and employers may deduct these cash payments to charity as a business expense” (IR-2017-160).
• Loans and Hardship Distributions. The IRS announced broad-based relief to facilitate loans and hardship distributions by employer-sponsored retirement plans, including 401(k) plans. In addition to making it easier for the victims themselves to access money in their retirement accounts, this relief applies to people outside the disaster areas who wish to take out loans or hardship distributions to assist a son, daughter, parent, grandparent, or dependent living or working in such areas (IR-2017-160).
• Minimum Funding Contributions. Deadlines for pension contributions and the filing of required notices and other elections by sponsors of single-employer defined benefit plans are pushed back until Jan. 31, 2018, for employers in Texas and Florida affected by Harvey and Irma. The same extended deadline is available for the required actuarial certification of the funded status of multiemployer plans (IRS Notice 2017-49).
• Form 5500 Filing. The extra time granted by the IRS to perform “time-sensitive” actions also applies to the filing of Form 5500 series returns, which are the annual information reports that pension and benefit plans must submit to the IRS (TX-2017-09, FL-2017-04, and GA-2017-02).
DOL Relaxes Standards
The DOL relaxed several key standards pertaining to retirement and health plans in areas hit by Harvey and Irma. The DOL’s Employee Benefits Security Administration explained the relief available under the Employee Retirement Income Security Act in a series of FAQs and on disaster relief pages for employers and advisers and for workers and families. The relief below was announced in a pair of news releases (Number 17-1216-NAT and 17-1297-NAT).
• Untimely Contributions. Employers and service providers that aren’t able to submit participant contributions to retirement plans on time won’t be penalized if they are located in the areas impacted by the hurricanes.
• Notices of Plan Blackouts. The agency is excusing hurricane-related failures to provide timely notice of retirement plan blackout periods. Participants usually must be notified 30 days ahead of a temporary suspension of a plan that restricts their ability to direct investments and obtain loans or other kinds of distributions.
• Benefit Losses. ERISA-covered group health plans in hurricane-affected areas should make “reasonable accommodations” to prevent benefit losses in the event that participants and beneficiaries miss claim deadlines.
PBGC Also Eases Deadlines
Additional relief has been granted by the PBGC, which collects premiums from defined benefit plans to fund its termination insurance program for bailing out financially distressed plans.
• Termination Insurance Premium Payments. The PBGC is waiving plan insurance premium penalties, but not interest charges, for premiums that were due from plan sponsors in Texas as early as Aug. 23, 2017, as long as payments are received by Jan. 31. For plan sponsors in Florida and Puerto Rico, premiums that came due when Irma struck can also be submitted as late as Jan. 31 without penalties (Disaster Relief Number 17-09, Number 17-11, and Number 17-12).
• Other Deadlines. For victims of Harvey in Texas and victims of Irma in Florida, the PBGC is also extending other deadlines, including those for plan terminations, reportable events notices, and annual employer reporting (Disaster Relief Number 17-09 and Number 17-11).
Design benefit plans and respond quickly and confidently to a range of potential issues with a free trial to the Benefits Practice Resource Center.
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