EBSA Gives ERISA Regulatory Relief To Louisiana Storm Victims


The U.S. Department of Labor Employee Benefits Security Administration (EBSA) announced employee benefit plan compliance relief for plans, plan sponsors and service providers and plan members adversely impacted by recent storms and flooding in Louisiana since Aug. 11, 2016.The relief acknowledges that plan fiduciaries, employers, labor organizations, service providers, and participants and beneficiaries may encounter compliance-related issues over the next few months in connection with employee benefit plans covered by the Employee Retirement Income Security Act as the implications of the Louisiana storms unfold.

The guidance announced today generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located – as of Aug. 11, 2016 – in a Lousiana parish identified as covered disaster area due to storms’ devastation in this Internal Revenue Service (IRS) news release.

Today’s announced relief also is in addition to the Form 5500 Annual Return/Report filing relief already provided by the IRS in accordance with LA-2016-20 Tax Relief for Victims of Severe Storms, Flooding in Louisiana. (See the regulations under § 7508A and Section 8 of Rev. Proc. 2007-56, 2007-34 I.R.B. 388.)

  • Verification Procedures for Plan Loans and Distributions

IRS Announcement 2016-30 provides relief 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 provisions of the IRS announcement. For more information on IRS Announcement 2016-30, see here.

  • Participant Contributions and Loan Repayments

In keeping with 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 assets must be forwarded to the plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets – no later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer.

Today’s announcement states EBSA 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 timeframe. In such instances, the department will not – solely on the basis of a failure attributable to the Louisiana storms – 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. EBSA states that the IRS has informed EBSA that – subject to the foregoing conditions – it will not seek to assess an excise tax with respect to a prohibited transaction under Section 4975 of the code resulting solely from such a temporary delay.

  • Blackout Notices

In general, Section 101(i) of the 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.

Recognizing natural disasters, by definition, are beyond the control of a plan administrator, EBSA’s announcement states ENSA will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination with respect to blackout periods related to the Louisiana storms

  • ERISA Group Health Plan Compliance Guidance

The  announcement also states EBSA recognizes that plan participants and beneficiaries may encounter an array of problems due to the storms and flooding, such as difficulties meeting certain deadlines for filing 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.

The announcement also states EBSA acknowledges that there may be instances when full and timely compliance by group health plans and issuers may not be possible. EBSA 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. 

 

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