Administration November 11, 2024

DOL Announces Extended Deadlines for Plans Impacted by Hurricanes Helene, Milton

In all impacted areas, relief ends on May 1, 2025.

Reported by

The Department of Labor’s Employee Benefits Security Administration has announced extended deadlines and guidance for employee benefit plans, plan sponsors and participants who have been affected by the recent disasters of Hurricane Helene and Hurricane Milton.

The Disaster Relief Notice 2024-01 covers the major disasters declared by President Joe Biden; it begins on the first day of the incident period and ends on May 1, 2025. The Federal Emergency Management Agency established incident periods for different affected areas.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

For disaster areas in Florida, the incident period for Hurricane Helene began on September 23, 2024, and for Hurricane Milton, the incident period began on October 5, 2024.

For disaster areas in North Carolina, South Carolina and Virginia, the incident period began on September 25, 2024, and for disaster areas in Georgia, the incident period began on September 24, 2024. For disaster areas in Tennessee, the incident period began on September 26, 2024.

The guidance applies to employee benefit plans, plan sponsors, labor organizations, plan fiduciaries, participants, beneficiaries and plan service providers subject to ERISA who were located in a county, tribal area or other geographic area identified for individual assistance by FEMA because of the devastation caused by the covered disasters.

In addition to the relief provided by the notice, the DOL announced an extension of deadlines for furnishing other required notices or disclosures to plan participants and beneficiaries so that employers, plan fiduciaries and plan sponsors have additional time to meet their obligations under Title I of ERISA as a result of the covered disasters.

Plan fiduciaries will not be in violation of ERISA for failure to timely furnish a notice, disclosure or document by May 1, 2025, if the plan and responsible fiduciary act in “good faith” and furnish the notice as soon as administratively practicable under the circumstances. Acting in good faith includes using electronic alternative means of communicating with participants and beneficiaries who the plan fiduciary believes have effective access to electronic means of communication, which includes email, text messages and continuous access to websites, the DOL stated.

Plan Loans and Distributions

According to the DOL notice, if an employee pension benefit plan fails to follow procedural requirements for plan loans or distributions imposed by the terms of the plan, the DOL will not treat it as a failure if:

  • The failure is solely attributable to a covered disaster;
  • The plan administrator makes a “good-faith, diligent effort” under the circumstance to comply with those requirements; and
  • The plan administrator makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable.

Under the SECURE 2.0 Act of 2022, a qualified participant with a plan loan can delay repayment of their outstanding loan by up to one year if the due date would otherwise occur during a period that begins on the first day of the incident period and ends 180 days after the last day of the incident behavior.

The DOL has advised the Treasury and IRS that it will not treat any person as having violated Title I of ERISA solely because they complied with these special rules for plan loans.

The DOL also said it recognizes that some employers and service providers may not be able to forward participant payments and withholdings to employee pension benefit plans within prescribed timeframes due to a covered disaster. In such instances, the DOL said it will not take enforcement action with respect to a temporary delay in forwarding such payments or contributions to the plan due to a covered disaster.

“Employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances,” the notice stated.

PLANSPONSOR’s Ask the Experts column on November 5 addressed the question of whether IRS disaster relief extends to plan sponsors with affected service providers.

Blackout Notices

The DOL has made an exception for administrators of individual account plans who are typically 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.”

The regulations provide an exception to providing advanced notice when the inability to provide the notice is “due to events beyond the reasonable control of the plan administrator and a fiduciary.” As a result, the DOL will not require the written determination by a fiduciary pursuant to the regulation for blackout notices, as natural disasters are by definition beyond a plan administrator’s control.

Form 5500s, ERISA Fiduciary Compliance Guidance

The IRS is also providing Form 5500 annual return/report filing relief. Guidance for those impacted by both Hurricane Helene and Milton can be found on the IRS website.

In addition, the DOL reminds plan fiduciaries to make “reasonable accommodations” to prevent the loss of benefits or undue delay in benefits payments due to a covered disaster. The DOL said fiduciaries should attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.

The DOL will continue to monitor the effects of the covered disasters and may respond to the situation as appropriate, which may include providing additional relief, according to the notice.

Compliance November 11, 2024

Latest 401(k) Plan Forfeiture Complaint Filed Against BMO Financial

The bank’s retirement plan committee faces a complaint for alleged misuse of forfeited plan funds.

Reported by

BMO Financial Corp., a division of North America’s eighth-largest bank by assets, was sued in federal court in a complaint seeking class action status regarding the use of 401(k) plan forfeitures by its retirement plan committee.

The complaint filed Wednesday in the U.S. District Court for the Central District of California adds it a growing list of plan committees being accused of not properly using forfeited funds under the Employee Retirement Income Security Act. BMO, whose parent company, the Bank of Montreal, is based in Canada, wrote via email that the company “does not believe that these claims have merit and will be vigorously defending against them.”

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The suit was filed less than a week after a federal judge in the Northern District of California dismissed a similar lawsuit against Clorox Co.; the plaintiffs in that case were granted until November 12 to file a revised complaint with more specifics about the Clorox plan’s circumstances.

BMO has been added to a recent flurry of plan forfeiture lawsuits as the plaintiffs’ bar tests what some experts have described as a relatively common practice of using forfeited fees to pay down plan costs. The firm representing the plaintiff, John Shulak, is Haffner Law PC, which has filed other forfeiture suits, including one against Bank of America. Other firms hit with similar lawsuits include HP Inc., Intuit Inc., Qualcomm Inc. and Thermo Fisher Scientific Inc., the last of which had its case dismissed by the Southern District of California.

In Shulak vs. BMO Financial Corp., the plaintiff alleges that BMO and its benefits administration committee wrongfully used forfeited plan assets to reduce its employer contribution obligations, rather than for the benefit of participants. The plaintiff is seeking monetary damages for the alleged misuse, class action status for other participants in the plan at the time of the forfeiture uses, and dismissal of the plan committee members, among other requests for relief.

“Defendants’ allocation of forfeited fund assets to reduce its own employer contributions benefitted Defendants, but harmed the Plan and participants in the Plan, by reducing Plan assets, not allocating forfeited funds to participants’ accounts, and/or by causing participants to incur expenses that could otherwise have been covered in whole or in part by forfeited funds,” the complaint states. “By choosing to use forfeited Plan assets to benefit itself and not the Plan or the Plan’s participants, Defendants have placed its own interests above the interests of the Plan and its participants.”

The complaint claims that forfeitures were used to reduce company contributions of $1.28 million in 2023 and $1.18 million in 2022.

The plaintiffs allege a breach of duty under ERISA Rule 29 U.S.C. § 1104(a), by which a fiduciary must act in the sole interest of the participants and beneficiaries; Rule 29 U.S.C. §1103(c)(1), by which assets held in the plan must be used for the benefit of participants; Rule 29 U.S.C. § 1106, by which a fiduciary cannot use the plan for the benefit of a party in interest beyond the participants; and, finally, for BMO to not have properly monitored the plan committee’s work.

The BMO 401K Savings Plan had assets of $4.5 billion and 19,057 participants, as of the end of 2023, according to its Form 5500 filing.

In the Clorox case, as with others, the defendant argued that the use of forfeitures aligned with regulatory guidelines by going toward plan costs and that the use of such forfeitures was clearly laid out in plan documents.

«