Compliance September 1, 2017

PBGC Offers Substantial Detail on Hurricane Harvey Relief

The disaster relief announcement provides significant leeway relating to PBGC deadlines and penalties for impacted employers and sponsors, both for single and for multiemployer plans. 
Reported by

Following up on a previous announcement, the Pension Benefit Guaranty Corporation (PBGC) has shared more detail about its intent to waive certain penalties and extend certain filing deadlines in response to the hurricane disaster in Texas and Louisiana.

Technically speaking, this disaster relief announcement provides relief relating to PBGC deadlines to “designated persons.”  A “designated person” is defined as “any person responsible for meeting a PBGC deadline (e.g., a plan administrator or contributing sponsor) that is located in the disaster area for which the Internal Revenue Service (IRS) has provided relief in TX-2017-09, in connection with filing extensions for Form 5500 series returns, or cannot reasonably obtain information or other assistance needed to meet the deadline from a service provider, bank, or other person whose operations are directly affected by the severe storms and flooding from Hurricane Harvey that began on August 23, 2017, in Texas.”

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

In TX-2017-09, the IRS provides relief in connection with filing extensions for Form 5500 series returns as a result of the disaster for taxpayers who reside or have a business in the disaster area. The relief generally extends from August 23, 2017, through January 31, 2018. As laid out by PBGC, the disaster area consists of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton Counties.

If IRS adds additional areas in connection with those filing extensions, any person responsible for meeting a PBGC deadline that is located in those additional areas will also be a designated person, PBGC confirms.

PBGC also clarifies that this disaster relief announcement “does not cover every situation in which PBGC disaster relief may be warranted. For example, it does not capture every person that might experience difficulty in meeting a PBGC deadline for reasons relating to the severe storms and flooding from Hurricane Harvey that began on August 23, 2017, in Texas. It also does not grant specific disaster relief for all filings. For example, it does not provide relief for certain filings that involve particularly important or time sensitive information where there may be a high risk of substantial harm to participants or the PBGC insurance program, e.g., notices of large missed contributions under section 302(f) of ERISA (Form 200), advance notices of reportable events under ERISA section 4043, and annual financial and actuarial information from certain controlled groups under ERISA section 4010.”

Those persons affected by the severe storms and flooding from Hurricane Harvey that began on August 23, 2017, in Texas who need relief from PBGC that is not covered by this disaster relief announcement should contact PBGC as soon as reasonably possible. To request case-by-case relief, contact Diane Morstein at PBGC by calling 1‑800‑736‑2444, extension 4136, or 202‑326‑4136; sending an e-mail to practitioner.pro@pbgc.gov; or “writing to Diane Morstein, Pension Benefit Guaranty Corporation, Suite 610, 1200 K Street, NW, Washington, D.C.  20005‑4026, Re: “Disaster Relief Announcement 17-09”.

NEXT: Claiming disaster relief 

Other information shared by PBGC suggests that if the plan administrator of a plan is a designated person, PBGC will, for purposes of assessing any late payment or late information penalty, treat as timely any premium filing required to be made for the plan beginning on or after August 23, 2017, and on or before January 31, 2018, if the filing is made by January 31, 2018. Thus, for any such filing, PBGC will waive the applicable penalty, but not the applicable interest charges.

Concerning single-employer plan terminations, if the plan administrator of a plan that is terminating in a standard termination is a designated person, any of the following plan termination deadlines for the plan that fall on or after August 23, 2017, and on or before January 31, 2018, are extended to January 31, 2018:

  • The deadline for filing the standard termination notice (Form 500). This automatically extends the deadline for providing notices of plan benefits to participants and beneficiaries because that deadline is the date when the standard termination notice is filed.
  • The deadline for completing the distribution of plan assets.
  • The deadline for filing the post-distribution certification (Form 501) without penalty. This automatically extends the deadline for filing missing participant information and certifications without penalty and for paying missing participants’ designated benefits to PBGC without interest.

If the plan administrator of a plan that is terminating in a distress termination is a designated person and the deadline for filing the distress termination notice (Form 601) falls on or after August 23, 2017, and on or before January 31, 2018, that deadline is extended to January 31, 2018. 

PBGC goes on to explain that regulations on annual financial and actuarial information reporting require annual financial and actuarial information reporting in certain cases by contributing sponsors (and their controlled group members) maintaining plans with large underfunding or certain missed contributions or funding waivers. PBGC will grant relief where appropriate on a case-by-case basis for these reports.

The deadline for requesting review of a PBGC determination under PBGC’s regulation on rules for administrative review of agency decisions is generally 45 days (for an appeal) or 30 days (for a request for reconsideration) after the date of the determination. If a designated person is aggrieved by a PBGC determination, and the deadline for filing an appeal or a request for reconsideration of the determination falls on or after August 23, 2017, and on or before January 31, 2018, that person’s deadline for filing the appeal or request for reconsideration is extended to January 31, 2018.

Importantly, the disaster relief relating to premium deadlines also applies to multiemployer plans. For other multiemployer deadlines, under PBGC’s regulations governing multiemployer plans, various persons are subject to deadlines for making filings with PBGC, issuing notices to persons other than PBGC, and taking other actions. If the person responsible for meeting the deadline is a designated person, and the deadline falls on or after August 23, 2017, and on or before January 31, 2018, PBGC will neither assess a penalty under ERISA section 4302 nor take any other enforcement action with respect to any failure to comply with the deadline during the period ending on January 31, 2018.

Links to many of the forms mentioned above are available in the PBGC relief announcement, available in full online here. 

Compliance August 31, 2017

Hurricane Harvey Victims Get Relief from Regulators

The relief includes relaxed rules for hardships and loans and relaxed deadlines for filings and disclosures.
Reported by

The Internal Revenue Service (IRS) announced that defined contribution (DC) employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Harvey and members of their families.

Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though individual retirement account (IRA) participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster area localities affected by Hurricane Harvey and designated for individual assistance by the Federal Emergency Management Agency (FEMA). Currently, parts of Texas qualify for individual assistance. For a complete list of eligible counties, visit https://www.fema.gov/disasters. To qualify for this relief, hardship withdrawals must be made by January 31, 2018.

The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. As a result, eligible retirement plan participants will be able to access their money more quickly with a minimum of red tape. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

This broad-based relief means that a retirement plan can allow a victim of Hurricane Harvey to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. In addition, the plan can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement as described in Announcement 2017-11.

The IRS emphasized that the tax treatment of loans and distributions remains unchanged.

NEXT: Relief from the DOL

In addition, the Department of Labor (DOL) says it is working with the IRS to provide relief regarding 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 also says it 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 benefit plans within the prescribed timeframe. In such instances, the Department will not—solely on the basis of a failure attributable to Hurricane Harvey—seek to enforce the provisions of Title I of the Employee Retirement Income Security Act (ERISA) 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.

The DOL relaxed deadlines for filers of Form 5500s. This relief is in addition to Form 5500 Annual Return/Report filing relief already provided by the IRS. Form 5500 series returns that were required to be filed on or after August 23, 2017, and before January 31, 2018, have until January 31, 2018 to file.

In general, ERISA provides 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. 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. The DOL says natural disasters, by definition, are beyond the control of a plan administrator. With respect to blackout periods related to Hurricane Harvey, 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.

Finally, the DOL says it recognizes that plan participants and beneficiaries may encounter an array of problems due to the hurricane, such as difficulties meeting certain deadlines for filing health benefit claims and COBRA elections. 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 timeframes.

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. It says its 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 timeframes for certain claims’ decisions or disclosures impossible.

«