The Internal Revenue Service (IRS), US Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) each have issued guidance on relief in response to Hurricane Harvey.
On August 30, the IRS issued Announcement 2017-11 providing relief from certain verification procedures for qualified employer plans with respect to loans and hardship distributions for needs arising from Hurricane Harvey. Generally, plan administrators may rely on representations from employees or former employees with regard to the need for and amounts of hardship distributions. By amendment, plans that do not currently allow for loans or hardship distributions may now make loans or hardship distributions except from specified accounts or earnings on deferral contributions, in the case of hardship distributions. Any such amendment must be adopted no later than the end of the first plan year beginning after December 31, 2017. Any hardship of the employee is eligible for a hardship distribution, not only those listed in the Treasury Regulations, and postdistribution contribution restrictions are waived for hardship distributions made on or after August 23, 2017 and before January 31, 2018. Additionally, plans may streamline the normal procedural requirements for loans and distributions, provided that the plan administrator makes a good-faith diligent effort to comply with those procedures and that a reasonable attempt is made to assemble any missing documentation as soon as practicable. This guidance closely follows the IRS relief in connection with Form 5500 filing extensions.
Also on August 30, the DOL issued compliance guidance for plans affected by Hurricane Harvey. The DOL is working with the IRS with respect to verification procedures for plan loans and hardship distributions. In addition, the DOL will not seek to enforce penalties on employers that have a temporary delay in segregating employee contributions and loan repayments from the employer’s general assets, so long as the employer and service providers act reasonably, prudently, and in the interest of employees as soon as practicable. Fiduciaries who fail to meet the blackout notice requirements may also have relief from alleged violations. The DOL acknowledges that there may be numerous problems for participants and beneficiaries under group health plans (i.e., difficulties meeting deadlines for filing benefit claims) and states that plan fiduciaries should make reasonable accommodations to those individuals. Finally, the DOL recognizes that full and timely compliance by group health plans may not be possible and will work with them to provide appropriate relief.
On August 29, the PBGC announced that it is providing relief for plans affected by Hurricane Harvey. PBGC’s announcement, through Disaster Relief Number 17-09, generally waives late premium payment penalties and extends certain other deadlines (e.g., the deadline for filing a standard termination notice for a terminating plan). Plans not covered by the specific relief should contact the PBGC as soon as reasonably possible to obtain case-by-case relief consideration. Additionally, the PBGC has created a webpage for affected persons who receive their pension payments directly from the PBGC.