As a follow-up to our prior entry regarding Employee-Assistance Programs Available to Employers in the Wake of Hurricane Sandy, there have been two recent developments from the Internal Revenue Service of note:
- Notice 2012-69 addressed the treatment of certain amounts paid to Section 170(c) organizatinos under employer leave-based donation programs to aid victims of Hurricane Sandy. The IRS has stated that it will not assert that cash payments an employer makes to Section 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are made to the Section 170(c) organizations for the relief of victims of Hurricane Sandy and are paid before January 1, 2014. Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees. Employers who have adopted leave-sharing plans (or are considering their adoption) should take note of this development.
- Announcement 2012-44 provides relief to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by Hurricane Sandy. The Announcement also provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. Specifically, a qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Sandy, to an employee or former employee whose principal residence on October 26, 2012, was located in one of the counties that have been identified as covered disaster areas because of the devastation caused by Hurricane Sandy or whose place of employment was located in one of these counties on that date or whose lineal ascendant or descendant, dependent or spouse had a principal residence or place of employment in one of these counties on that date. In addition, a retirement plan will not be treated as failing to follow procedural requirements for plan loans or distributions imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after October 26, 2012, and continuing through February 1, 2013, with respect to distributions to the individuals described above, provided the plan administrator makes a good-faith diligent effort under the circumstances to comply with those requirements.
The IRS guidance contained in Notice 2012-69 and Announcement 2012-44 should be reviewed by all employers with employees or former employees impacted by Hurricane Sandy. The employee benefits attorneys of Duane Morris are available to assist employers with any questions that they may have regarding these issues.