DOL provides compliance guidance for employee benefit plans adversely affected by Hurricane Maria and California wildfires

The Department of Labor (DOL) has issued guidance for parties connected to ERISA-covered employee benefit plans that have been adversely affected by Hurricane Maria and the October 2017 California wildfires. 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 Hurricane Maria or the California wildfires, and is in addition to the Form 5500 relief furnished by the IRS 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 Hurricane Maria, 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 notes that 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 for plan loans to participants and beneficiaries, hardship distributions, and other pension benefit distributions. The DOL states that it will not treat any person as having violated the provisions of Title I of ERISA solely because they complied with the verification procedures of the IRS Announcement.

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 Hurricane Maria, the DOL will not allege a violation of the blackout notice requirements solely because a fiduciary did not make the required written determination.

ERISA group health plans

The DOL states that plan participants and beneficiaries may encounter a variety of problems due to Hurricane Maria and the California wildfires, such as difficulties meeting certain deadlines for filing benefit claims and COBRA elections. 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. 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 timeframes.
In addition, the DOL acknowledges that there may be instances when full and timely compliance by group health plans and issuers may not be possible. According to the DOL, its approach to enforcement continues to 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.

Extension of certain time periods for employee benefit plans

The DOL and IRS have provided 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. 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. The DOL and IRS provide several examples illustrating how to calculate the extensions covered in the notice.

Contact information

The DOL states that it and the IRS will continue to monitor the situation to address issues that are most important to helping individuals, employers, and plan sponsors recover from these disasters. For more information on Hurricane Maria and the 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,” at the EBSA’s Disaster Relief pages https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/disaster-relief and https://www.dol.gov/agencies/ebsa/workers-and-families/disaster-relief, or contact the Employee Benefits Security Administration (EBSA) online at www.askebsa.dol.gov, or call 1-866-444-3272. Direct questions about IRS guidance to the IRS at 1-877-829-5900.
Source: DOL News Release on Hurricane Maria and the California wildfires compliance guidance. DOL and IRS Notice of Extension.
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