EBSA provides compliance guidance for employee benefit plans adversely affected by Hurricane Sandy

The Employee Benefits Security Administration (EBSA) has issued guidance for parties connected to ERISA-covered employee benefit plans that have been adversely affected by Hurricane Sandy. The Department of Labor 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 to employee benefit plans, plan sponsors, and plan service providers that were located on October 26, 2012 in one of the counties or Tribal Nations that have been identified as covered disaster areas because of the damage caused by Hurricane Sandy, and is in addition to the Form 5500 relief furnished by the IRS in News Release IR-2012-83.

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 loan repayments within the required deadline. The DOL will not, solely because of a failure attributable to Hurricane Sandy, 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. If these conditions are met, the IRS has informed the DOL that the IRS will not seek to assess an excise tax for a prohibited transaction under Code Sec. 4975 resulting solely from such a temporary delay.

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 Sandy, 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 Sandy, 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 by Hurricane Sandy makes compliance with pre-established deadlines for certain claims decisions or disclosures impossible.

Contact Information

The DOL states that it and the IRS will continue to monitor the situation and that further guidance will be forthcoming. For more information on Hurricane Sandy relief under ERISA, contact EBSA 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: EBSA News Release, November 20, 2012.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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