U.S. Department of Labor Announces Guidance and Relief For Employee Benefit Plans Impacted by Recent Hurricanes
WASHINGTON, DC – The U.S. Department of Labor has published employee benefit plan compliance guidance and relief for victims of Hurricanes Florence and Michael.
The Department recognizes that plan fiduciaries, employers, labor organizations, service providers, and participants and beneficiaries may encounter issues complying with the Employee Retirement Income Security Act (ERISA) over the next few months as the consequences of Hurricane Florence and Hurricane Michael unfold.
The guidance generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located in a county identified now or in the future for individual assistance by the Federal Emergency Management Agency because of Hurricane Florence or Hurricane Michael.
Verification Procedures for Plan Loans and Distributions
The Department will not treat an employee pension benefit plan as failing to follow procedural requirements for plan loans or distributions imposed by the terms of the plan solely because the failure is attributable to Hurricane Florence or Hurricane Michael. This is provided the plan administrator makes a good-faith diligent effort under the circumstances to comply with those requirements, and makes a reasonable attempt to assemble any missing documentation as soon as practicable.
Participant Contributions and Loan Repayments
The Department recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in covered disaster areas eligible for individual assistance will not be able to forward participant payments and withholdings to employee pension benefit plans within prescribed time frames. In such instances, the Department will not – solely on the basis of a failure attributable to Hurricane Florence or Hurricane Michael – take enforcement action with respect to a temporary delay in forwarding such payments or contributions to the plan. Affected employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as practical under the circumstances.
In general, the administrator of an individual account plan is required to provide 30 days advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited or restricted by a blackout period. For instance, a period of suspension, limitation or restriction of more than three consecutive business days on a participant's ability to direct investments, obtain loans or obtain other distributions from the plan. The regulations provide an exception to the advance notice requirement when the inability to provide the notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing.
Natural disasters, by definition, are beyond the control of a plan administrator. With respect to blackout periods related to Hurricane Florence or Hurricane Michael, the Department will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.
ERISA Claims Compliance Guidance
The Department recognizes that affected plan participants and beneficiaries may encounter an array of problems due to Hurricane Florence and Hurricane Michael. 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, retirement, and other employee benefit plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment 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 time frames.
In addition, the Department acknowledges that there may be instances when full and timely compliance with claims processing requirements by plans and service providers may not be possible. Our approach to enforcement will be marked by an emphasis on compliance assistance and include grace periods and other relief where appropriate, including when physical disruption to a plan or service provider's principal place of business makes compliance with pre-established time frames for certain claims' decisions or disclosures impossible.
Form 5500 Annual Return/Report filing relief is provided in accordance with Hurricane Florence and Hurricane Michael Internal Revenue Service (IRS) news releases listed on the IRS disaster relief website. See the Treasury regulations under Revenue Code § 7508A and Section 8 of Rev. Proc. 2007-56, 2007-34 I.R.B. 388.
The Department will continue to monitor the situation to address those issues that are most important in helping individuals, employers and plan sponsors recover from these disasters. For more information, visit EBSA's Disaster Relief pages for employers and advisers and workers and families, or contact the Department's Employee Benefits Security Administration online at www.askebsa.dol.gov or by calling 1-866-444-3272. Questions about IRS guidance should be directed to the IRS at 1-877-829-5500.