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Compliance October 29, 2018
Retirement Plan Sponsors and Providers Given Relief by DOL Due to Hurricanes
The DOL relief relates to plan loans and distributions, remittance of contributions and blackout period notices.
Reported by John Manganaro
The Department of Labor (DOL) has published compliance guidance and relief applying 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.
In a statement announcing the relief, a DOL spokesperson says 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.
According to the announcement, 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.” As the DOL stipulates, this relief is only provided assuming 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.”
Echoing relief guidance issued for 2016 and 2017 for hurricane disasters impacting U.S. coastal regions, the department further 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 required 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,” DOL pledges. “Affected employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as practical under the circumstances.”
Under normal circumstances, to comply with DOL regulations pertaining to “blackout periods,” in general, the administrator of a tax-qualified retirement 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—of the type that is common during a recordkeeper migration, for example. As the DOL points out, 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.”
Based on this exception, with respect to blackout periods related to Hurricane Florence or Hurricane Michael, the DOL “will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.”
In the statement announcing the hurricane relief, the DOL 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,” the spokesperson says. The relief announcement further notes that 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.”
The DOL will continue to monitor the situation, with the stated goal of “addressing those issues that are most important in helping individuals, employers and plan sponsors recover from these disasters.”
More information is available online for employers and advisers, as well as for workers and families; by contacting the DOL’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.