With the IRS having already announced a relaxation in certain restrictions on plan loans and hardships for those impacted by the flooding in Louisiana, the Labor Department has announced some additional relief for plan sponsors.
The guidance, from the Labor Department’s Employee Benefit Security Administration (EBSA) generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located – as of Aug. 11, 2016 – in a parish identified as covered disaster area due to the Louisiana storms’ devastation. It is in addition to the Form 5500 Annual Return/Report filing relief already provided by the IRS in accordance with LA-2016-20 Tax Relief for Victims of Severe Storms, Flooding in Louisiana.
Plan Sponsor Relief
IRS Announcement 2016-30 provides relief from certain verification procedures that may be required under retirement plans with respect to plan loans to participants and beneficiaries, hardship distributions and other pension benefit distributions. The Labor Department says it “will not treat any person as having violated the provisions of title I of ERISA solely because they complied with the provisions of the IRS announcement.”
Noting that contributions and loan repayments must normally be forwarded to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets – no later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer – the Labor Department acknowledges that some employers and service providers acting on employers’ behalf, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the Labor Department says that it will not “solely on the basis of a failure attributable to the Louisiana storms – seek to enforce the provisions of Title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practical under the circumstances.” Moreover the Labor Department notes that the IRS has informed it that, subject to the foregoing conditions, it will not seek to assess an excise tax with respect to a prohibited transaction under Section 4975 of the code “resulting solely from such a temporary delay.”
Blackout Notices
The Labor Department acknowledges that natural disasters, by definition, are beyond the control of a plan administrator, and that with respect to blackout periods related to the Louisiana storms, it “will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.”
The Labor Department notice also acknowledged the potential for difficulties meeting certain deadlines for filing benefit claims and COBRA elections, noted that the guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being, and that plan fiduciaries should “make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.”
More information about Louisiana storms relief under the ERISA can be found at the “FAQs for Participants and Beneficiaries Following Louisiana Storms” page on the DOL website.
