DOL Provides Post-Hurricane Compliance Relief

November 21, 2012 ( – The Department of Labor (DOL) issued compliance information for employee benefit plans adversely affected by Hurricane Sandy.

The agency understands as the implications of Hurricane Sandy unfolds, plan fiduciaries, employers, labor organizations, service providers, as well as 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), Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said. The guidance applies to employee benefit plans, plan sponsors and service providers to such employers, located in one of the counties or Tribal Nations, on October 26, 2012, that have been identified as covered disaster areas because of Hurricane Sandy. These areas are identified by the IRS at

An IRS announcement provided 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 DOL 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.

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, and thereby are required to be forwarded to the plan, on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th 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 acting on employers’ behalf, such as payroll processing services, located in designated affected areas will not be able to forward participant payments and withholdings to employee pension plans within the prescribed timeframe. In such instances, the agency will not, solely on the basis of a failure attributable to Hurricane Sandy, seek to enforce the provisions of Title I with respect to a temporary delay. In addition, the IRS said 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.

The regulations provide an exception to the 30-day advance notice requirement to participants and beneficiaries 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.

With respect to blackout periods related to Hurricane Sandy, the DOL will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.

The agency said it recognizes that plan participants and beneficiaries may encounter difficulties such as meeting certain deadlines for filing benefit claims and COBRA elections. 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.

Additionally, the DOL acknowledged there may be instances when full and timely compliance by group health plans and issuers may not be possible. As stated previously by the agency (see its approach to enforcement continues to be marked by an emphasis on 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 the hurricane makes compliance with pre-established timeframes for certain claims decisions or disclosures impossible.