WASHINGTON, DC – The U.S. Department of Labor announced employee benefit plan compliance guidance and relief for victims of Hurricane Maria and the October 2017 California Wildfires.
The Department understands 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 implications of Hurricane Maria and the California Wildfires unfold.
The guidance provided in this statement generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located in a county identified for individual assistance by the Federal Emergency Management Agency because of the devastation caused by Hurricane Maria or the California Wildfires.
Verification Procedures for Plan Loans and Distributions
IRS Announcement 2017-15 provides relief to victims of Hurricane Maria and the California Wildfires from certain verification procedures that may be required under retirement plans with respect to plan loans to participants and beneficiaries, hardship distributions, and other pension benefit distributions. The Department will not treat any person as having violated the provisions of Title I of ERISA solely because they complied with the verification procedures of IRS Announcement 2017-15.
Participant Contributions and Loan Repayments
Under 29 CFR § 2510.3-102, amounts that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his or her wages by an employer, for contribution or repayment of a participant loan to an employee pension benefit plan constitute plan assets. These amounts must be forwarded to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer.
The Department recognizes that some employers and service providers acting on employers’ behalf, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed time frame. In such instances, the Department will not – solely on the basis of a failure attributable to Hurricane Maria – seek to enforce the provisions of Title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practical under the circumstances.
In general, Section 101(i) of ERISA and the regulations issued thereunder, at 29 CFR § 2520.101-3, provide that the administrator of an individual account 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 (i.e., a period of suspension, limitation or restriction of more than three consecutive business days on a participant’s ability to direct investments, obtain loans or obtain other distributions from the plan). 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.
Natural disasters, by definition, are beyond the control of a plan administrator. With respect to blackout periods related to Hurricane Maria, the Department will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.
ERISA Section 518 Extension of Certain Time Frames for Employee Benefit Plans Affected by Hurricane Maria
The Department in conjunction with the IRS announced an extension of a number of deadlines so plan participants, beneficiaries, and employers affected by Hurricane Maria have additional time to make critical health coverage and other decisions affecting benefits. The notice of extension will appear in the Federal Register on November 21, 2017. For group health plans, the relief provides additional time to comply with certain deadlines affecting COBRA continuation coverage, special enrollment, claims for benefits, appeals of denied claims, and external review of certain claims. With regard to disability, retirement and other plans, the relief provides additional time for participants and beneficiaries to make claims for benefits and appeal denied claims. Without the extension, people might miss key events in the aftermath of the storm that could result in the loss or lapse of group health coverage or the denial of a valid claim for benefits.
ERISA Group Health Plan Compliance Guidance
The Department recognizes that plan participants and beneficiaries may encounter an array of problems due to Hurricane Maria and the California Wildfires. The guiding principle for plans must be to act reasonably, prudently, and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.
In addition, the Department acknowledges that there may be instances when full and timely compliance by group health plans and issuers 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 above relief is in addition to the Form 5500 Annual Return/Report filing relief already provided by the IRS in accordance with the Hurricane Maria and California Wildfires news releases listed on the IRS disaster relief website. See the Treasury regulations under Revenue Code § 7508A and Section 8 of Rev. Proc. 2007-56, 2007-34 I.R.B. 388.
The Department and IRS will continue to monitor the situation to address those issues that are most important in helping individuals, employers and plan sponsors recover from these disasters. For more information on Hurricane Maria and California Wildfires relief under ERISA, see “FAQs for Participants and Beneficiaries Following Hurricanes Harvey, Irma, and the California Wildfires” and “FAQs for Participants and Beneficiaries Following Hurricane Maria,” visit EBSA’s Disaster Relief pages for employers and advisers and workers and families, or contact the Department’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 1-877-829-5900.