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Hardship Withdrawal and Tax Filing Relief Due to Recent Disaster Declarations

In 2019, the IRS updated the safe harbor rules for hardship withdrawals from a retirement plan to permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (“FEMA”), provided the participant’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA has issued a series of disaster declarations as a result of recent catastrophes across the country, including Hurricane Ida, the wildfires in California, and the severe storms and flooding in Tennessee. A list of counties designated by FEMA for individual assistance associated with these incidents can be found on FEMA’s website here. These disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or… Continue Reading

Employee Benefits Regulations Potentially Impacted by the Biden Administration?ÇÖs Regulatory Freeze

On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) announcing a regulatory freeze on regulations that have not taken effect as of the date of the Memo. Specifically, the Memo recommends postponing the effective date of any regulation that has been issued, but has not taken effect, for 60 days from the date of the Memo. The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review. Listed below are some of the proposed and final regulations related to employee benefits that may be subject to withdrawal or postponement under the Memo: Prohibited Transaction Exemption 2020-02 ?Çô Improving Investment Advice for Workers & Retirees. Final Rule. Application of the Employer Shared Responsibility Provisions and Certain Nondiscrimination Rules to Health Reimbursement Arrangements and Other Account-Based Group Health Plans Integrated with Individual Health Insurance Coverage or Medicare. Final Rule. Pension Benefit Statements-Lifetime… Continue Reading

Severe Winter Storm Hardship Withdrawal Relief

The safe harbor rules for hardship withdrawals from a retirement plan permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (?Ç£FEMA?Ç¥) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, provided the participant?ÇÖs principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA issued a series of disaster declarations as a result of the February 2021 winter storms that impacted portions of Texas, Louisiana, and Oklahoma. A list of counties that have been designated by FEMA for individual assistance in those states can be found on FEMA?ÇÖs website here. Those disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or work… Continue Reading

Upcoming Compliance Deadlines

After February 28, 2021, the suspension of COBRA, special enrollment, and claims deadlines may be over. The government?ÇÖs authority for suspending these deadlines is limited by statute to a period of one year. It is unclear whether the one-year limit applies on the individual level (i.e., each person gets up to a year disregarded if the national emergency is ongoing) or applies as a limit on the outbreak period itself (i.e., deadlines for all persons would resume being counted as of March 1, 2021). The DOL/IRS have not yet issued guidance on this question. Employers may want to contact their service providers to see how they intend to administer, and communicate to participants, the end of the suspension of deadlines.

Hurricane Sally Hardship Withdrawal Relief

Last year, the safe harbor rules for hardship withdrawals were amended to include a new subsection which permits hardship withdrawals for expenses and losses incurred by an employee on account of a disaster declared by the Federal Emergency Management Agency (?Ç£FEMA?Ç¥). Recently, FEMA issued a disaster declaration as a result of Hurricane Sally that impacted portions of Alabama and Florida on September 14, 2020. A list of areas covered by the disaster declaration can be found on FEMA?ÇÖs website. This disaster declaration means that affected participants may be eligible for hardship distributions under their 401(k) plans. Plan sponsors should review their 401(k) plan?ÇÖs hardship distribution provisions to ensure they contain either the updated safe harbor provisions specifically allowing hardship distributions for federally declared disasters or catch-all language allowing distributions on any permissible hardship under the Internal Revenue Code.

COVID-19 EMPLOYEE BENEFIT AND EXECUTIVE COMPENSATION QUESTIONS AND ANSWERS

In light of the recent economic developments stemming from the COVID-19 pandemic, many employers are evaluating their employee benefit plans and how employee and employer costs will be impacted. The following summary provides a list of questions we have been receiving from clients over the past week, along with action items to help employers address these issues. Health and Welfare Plans and Fringe Benefits Should benefits coverage continue while an employee is on an unpaid furlough? If so, how would the employee pay the employee?ÇÖs portion of the premium? Could the employee elect to drop coverage due to the reduction in hours of active service? Could the employer pay for coverage for some or all of its furloughed employees? Continued eligibility for benefits will depend on whether the employer treats the furlough as a termination of employment or as an unpaid leave of absence. The terms of the plan, including… Continue Reading

PBGC Provides Disaster Relief to Persons in Texas Affected by Hurricane Harvey

In Disaster Relief Announcement 17-09, the PBGC announced that it is waiving certain penalties and extending certain deadlines in response to Hurricane Harvey. In accordance with the relief granted by the IRS in Tax Relief Notice TX-2017-09, the PBGC will provide relief relating to PBGC deadlines to persons responsible for meeting PBGC deadlines who reside or are located in the disaster area consisting of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton Counties in Texas (“Designated Persons“). The relief generally extends from August 23, 2017 through January 31, 2018 (the “Relief Period“). Importantly, the relief offered by the PBGC does not cover every situation in which relief may be warranted. 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… Continue Reading

IRS, DOL, and PBGC Announce Disaster Relief in Response to Severe Storms and Flooding in Texas

The IRS announced tax relief for victims of severe storms and flooding in the Texas-Houston area. This relief generally extends from April 17, 2016 through September 1, 2016, and covers taxpayers who reside or have a business in Fayette, Grimes, Harris, or Parker Counties. The relief also includes the filing of Forms 5500 with the IRS. The DOL has mirrored the IRS?ÇÖs Form 5500 filing relief. In addition, PBGC is waiving certain penalties and extending certain deadlines. PBGC?ÇÖs announcement provides relief relating to PBGC deadlines to persons responsible for meeting a PBGC deadline who are located in the disaster area for which the IRS has provided relief. If the 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 entitled to that relief. The IRS announcement is available?áhere. The DOL announcement is… Continue Reading

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