EBPAQC Alert No. 286 


    AICPA
     
    IRS and DOL Provide Hurricane Disaster Relief for Contributions, Distributions, Loans, Withdrawals, Claims and Notices
           
      AICPA
    November 21, 2012
    EBPAQC Alert #286
     
     
    In This Alert
       
    IRS Allows Hardship Withdrawals
    DOL Issues Public Statement on Compliance Relief
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    Dear Center Members
     
    The IRS and the DOL continue to issue news releases to ease administrative burdens to plans and plan sponsors affected by Hurricane Sandy.
    IRS Allows Hardship Withdrawals to Victims of Hurricane Sandy and Their Family Members

    Last week the IRS released Announcement 2012-44 which allows 401(k) and similar employer-sponsored retirement plans to make loans and hardship distributions to victims of Hurricane Sandy and certain members of their families who live or work in the disaster area. To qualify for this relief, hardship withdrawals must be made by February 1, 2013.

    The IRS is also providing relief from certain verification procedures that normally apply to retirement plan loans and hardship distributions to allow eligible retirement plan participants to access their money more quickly. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

    As a result of this relief, a retirement plan can allow a Sandy victim to take a hardship distribution or borrow up to the specified statutory limits from the victim's retirement plan. In addition, a person who lives outside the disaster area can obtain a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

    Click here to read the full news release and announcement 2012-44 for all the details of this relief.

    To keep up-to-date on all of the IRS' relief efforts, visit their Help for Victims of Hurricane Sandy webpage.

    DOL Issues Public Statement on Compliance Relief to Victims of Hurricane Sandy
    The DOL announced relief today for plans and plan sponsors affected by Hurricane Sandy to assist with clarifying possible compliance issues due to recent IRS assistance relief, inability to deposit employee contributions timely, blackout notice violations, and group health plan participant benefit claims. The relief provided under this announcement is in addition to the Form 5500 Annual Return/Report filing relief already provided by the IRS.

    Specifically, the DOL clarified that it will not treat any person as having violated the provisions of title I of ERISA solely because they complied with the provisions of IRS Announcement 2012-44 regarding 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 (see details above).

    In addition, the DOL indicated it will not seek to enforce the provisions of title I with respect to a temporary delay due to Hurricane Sandy in forwarding of participant loan repayments and deferrals to the plan in the prescribed timeframes as long as the 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 also informed the DOL that 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 DOL also announced relief from the 30 days advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by a blackout period. 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.

    Finally, because plan participants and beneficiaries may encounter an array of problems due to the hurricane, such as difficulties meeting certain deadlines for filing benefit claims and COBRA elections, the DOL issued a reminder that its approach to enforcement emphasizes compliance assistance and includes grace periods and other relief, where appropriate, to provide reasonable accommodations to prevent the loss of benefits due to the failure of individuals to comply with pre-established timeframes.

    If you have further questions related to this guidance or other Hurricane Sandy relief, contact the DOL's Employee Benefit Security Administration online at www.ask.ebsa.dol.gov or by calling 1-866-444-3272. Questions about IRS guidance should be directed to the IRS at 1-877-829-5900.

    Click here to read the DOL's announcement.
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    Sincerely,
    AICPA Employee Benefit Plan Audit Quality Center
     

     
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