Pension & Benefits News DOL provides compliance guidance for employee benefit plans adversely affected by severe storms in Nebraska, Iowa, and Alabama
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Monday, April 15, 2019

DOL provides compliance guidance for employee benefit plans adversely affected by severe storms in Nebraska, Iowa, and Alabama

By Pension and Benefits Editorial Staff

The Department of Labor (DOL) has issued guidance for parties connected to ERISA-covered employee benefit plans that have been adversely affected by the 2019 severe winter storm, straight-line winds, and flooding in Nebraska, the severe storms and flooding in Iowa, and the severe storms, straight-line winds, and tornadoes in Alabama (covered disasters). The DOL states that it understands that plan fiduciaries, employers, labor organizations, service providers, participants, and beneficiaries may have plan compliance-related problems over the next few months.

The relief provided in this guidance applies generally to employee benefit plans, plan sponsors, employers, employees, and plan service providers that were located in one of the counties that have been identified by the Federal Emergency Management Agency (FEMA) as covered disaster areas because of the damage caused by the covered disasters. The DOL notes that the IRS has provided Form 5500 relief for those disasters on the IRS disaster relief website (https://www.irs.gov/newsroom/tax-relief-in-disaster-situations).

Participant contributions and loan repayments. Participant contributions and loan repayments become plan assets when they are paid to employers or withheld from participants’ wages by employers and are required to be forwarded to the pension plans on the earliest date they can be reasonably segregated from the employers’ general assets. In any event, these contributions and loan repayments must be forwarded to the plans no later than the fifteenth business day of the month following the month in which the amounts were paid to or withheld by the employer.

The DOL recognizes that some employers and service providers located in the covered disaster areas will not be able to forward participant contributions and withholdings within the required deadline. The DOL will not, solely because of a failure attributable to the covered disasters, enforce ERISA Title I provisions because of a temporary delay in forwarding these contributions or payments to the extent that these parties act reasonably, prudently, and in the interest of employees to comply as soon as it is practical to do so.

Verification procedures for plan loans and distributions. The DOL 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 the covered disasters. However, the plan administrator must make a good-faith diligent effort under the circumstances to comply with those requirements, and make a reasonable attempt to assemble any missing documentation as soon as practicable.

Blackout notices. Under ERISA §101(i) and regulations, administrators of individual account plans are 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). There is an exception to the advance notice requirement when the inability to provide the advance notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing.

The DOL notes that natural disasters are, by definition, beyond the control of a plan administrator. Therefore, with respect to blackout periods related to the covered disasters, the DOL will not require a fiduciary determination.

ERISA claims compliance. The DOL states that plan participants and beneficiaries may encounter a variety of problems due to covered disasters. The DOL explains that 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, retirement, and other employee benefit plans for their well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in payment 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 timeframes.

In addition, 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. According to the DOL, its approach to enforcement will emphasize compliance assistance and includes 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 deadlines for certain claims decisions or disclosures impossible.

Contact information. The DOL states that it will continue to monitor the situation as appropriate. For more information, see the Employee Benefits Security Administration’s (EBSA’s) Disaster Relief pages for employers, advisers, workers, and families, or contact the EBSA at www.askebsa.dol.gov, or call 1-866-444-3272. Direct questions about IRS guidance to the IRS at 1-877-829-5500. See also the Frequently Asked Questions (FAQs) on the EBSA website at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/2019-nebraska-iowa-alabama-severe-storms-disaster-relief.pdf.

SOURCE: DOL Fact Sheet on compliance guidance and relief.

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