In light of the devastation following recent storms and flooding in Louisiana, the U.S. Department of Labor (DOL) announced an update on compliance with employee benefit plan rules for those adversely impacted in the state since August 11, 2016.
The Internal Revenue Service (IRS) previously announced streamlined loan procedures and liberalized hardship distribution rules for plan sponsors affected by the flooding.
The DOL says it understands 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 (ERISA) as the implications of the Louisiana storms unfold. The updated guidance provided generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located as of August 11, 2016, in a parish identified as covered disaster area due to storms’ devastation.
The parishes are identified in a news release issued by the U.S. Internal Revenue Service. These compliance updates are 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.)
Contributions and Loan Repayments
The DOL 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 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 of 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 IRS has informed the DOL 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 Internal Revenue Code resulting solely from such a temporary delay. NEXT: Blackout Notices and Health Plan Compliance