Compliance October 28, 2005

Feds Add DB Extensions for Katrina Victims

October 28, 2005 (PLANSPONSOR.com) - Federal officials on Friday announced that defined benefit plan sponsors in the areas affected by Hurricane Katrina can take more time to make minimum funding requirements and to pay pension insurance premiums.
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Making that announcement were the Internal Revenue Service (IRS) and  Pension Benefit Guaranty Corporation (PBGC) .

Regulators also put off the deadlines for requesting a waiver of minimum funding requirements (due to temporary substantial business hardship), providing a notice to participants about underfunding, and initiating actions related to the process of plan termination.

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These extensions apply to actions that otherwise would have had to occur between August 29, 2005 and February 27, 2006.

Friday’s pronouncement picks up the same definition of affected plans as was used in the prior regulatory relief. The key requirement to be eligible for the IRS relief is to be located in an area President Bush has declared eligible for “individual assistance.” A plan qualifies if any of the following were in such an area:

  • the employer/sponsor’s principal place of business for a single-employer plan,
  • the principal place of business of employers with more than 50 percent of a multiemployer plan’s active participants,
  • the plan administrator’s office,
  • the primary recordkeeper’s office,
  • the office of the enrolled actuary or other advisor engaged to determine the plan’s funding requirements.

A plan that was located outside the disaster areas can still be eligible for the PBGC relief when it cannot reasonably obtain information or other assistance needed to meet the deadline from a bank or other service provider whose operations are in the disaster areas.

The complete IRS document is at http://www.irs.gov/pub/irs-drop/n-05-84.pdf .

The Department of Labor’s Employee Benefits Security Administration (EBSA) and the IRS issued guidance earlier this year on helping Hurricane Katrina victims obtain distributions and loans from their 401(k)’s and other employer-sponsored plans. (SeeDoL Helps Hurricane Katrina Victims ).

In Septemner, President Bush signed into law a series of tax breaks for Katrina victims including the loosening of rules for distributions and loans from workplace retirement plans or IRAs as part of the  Katrina Emergency Tax Relief Act of 2005 . (See  Bush Storm Relief Bill Includes Plan Distribution, Loan Provisions ).

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