The U.S. Department of Labor’s (DOL) Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi announced an update on compliance with employee benefit plan rules for those adversely impacted by Hurricane Matthew.
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 this hurricane unfold.
The guidance provided in this statement generally applies to employee benefit plans, plan sponsors, employers and employees, and service providers to such employers who were located in counties referenced in Internal Revenue Service (IRS) Announcement 2016-39. That announcement includes 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 said it 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.
In addition, the DOL is providing relief for plan sponsors having trouble meeting rules for forwarding contributions and loan repayments to the plan. The DOL said it will not, solely on the basis of a failure attributable to Hurricane Matthew, 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. 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 group health plan compliance
The DOL notes that in general, Section 101(i) of ERISA and the regulations issued thereunder 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.
Natural disasters, by definition, are beyond the control of a plan administrator. With respect to blackout periods related to Hurricane Matthew, 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.
In addition, 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.
Also, the DOL 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.
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