Hurricane Harvey

Hurricane Relief Legislation Will Not Be Fast Tracked Through House

A move to fast track through the House of Representatives the Disaster Tax Relief and Airport and Airway Extension Act of 2017 failed. Instead, the legislation, which would grant special access to retirement savings arrangements to victims of Hurricanes Harvey, Irma, and Maria, will have to follow the regular order of procedures to secure passage in the House.

A two-thirds majority of House members—known as “unanimous consent”—is required to sidestep the normal process of a bill being subject to committee hearings, debate, and possible amendment before a final vote. Some who opposed advancing the bill to a vote by the expedited unanimous consent process argued that the legislation should follow the normal legislative procedures. The legislation could be revived later this week under the regular order process (requiring only a simple majority to pass). At this time, no comparable legislation is currently under consideration in the Senate. Watch this Ascensus News for further developments.


DOL Expands Defined Benefit Plan Relief to Counties in Florida

The steady stream of special relief granted to retirement plans and taxpayers in the wake of Hurricanes Harvey and Irma continues. The Department of Labor’s Pension Benefits Guaranty Corporation (PBGC)—the DOL division with primary oversight over defined benefit pension plans—has issued Disaster Relief Announcement 17-11, which expands special relief granted to plans and designated persons (those responsible for meeting a PBGC deadline) following Hurricane Irma events.

Announcement 17-10, issued on September 11, identified relief for the islands of St. John and St. Thomas in the U.S. Virgin Islands. Announcement 17-11 now expands this relief to include the Florida counties of Broward, Charlotte, Clay, Collier, DuVal, Flagler, Hillsborough, Lee, Manatee, Miami-Dade, Monroe, Palm Beach, Pinellas, Putnam, Sarasota, and St. Johns. Note that the DOL could further expand the identified disaster to other areas as well.

These announcements explain that certain events whose normal deadline is on or after September 4, 2017, and on or before January 31, 2018, may be completed through January 31, 2018.

The deadline relief applies to the following actions.

  • Payment of PBGC insurance premiums (single and multi-employer plans)
  • Filing termination notices (single-employer plans)
  • Completing the distribution of plan assets (single-employer plans)
  • Filing post-distribution certification, Form 501 (single-employer plans)
  • Filing for distress termination, Form 601
  • Filing a reportable event notice
  • Filing Form 5500, Annual Return/Report of Employee Benefit Plan
  • Certain plans with underfunding, missed contribution, or funding waivers that must file special actuarial information within 15 days following the filing of their Form 5500, will have until January 31, 2018, for such filing.

 


DOL Announces Defined Benefit Plan Relief for Hurricane Harvey

The Department of Labor’s Pension Benefits Guaranty Corporation (PBGC)—the DOL division with primary oversight over defined benefit pension plans—has issued disaster relief Announcement 17-09. It describes special relief the agency is granting to plans and to designated persons (those responsible for meeting a PBGC deadline) following Hurricane Harvey events in Texas.

The PBGC announcement cites IRS news release TX-2017-09 as setting the timing parameters for deadline extensions. Certain events whose normal deadline is on or after August 23, 2017, and on or before January 31, 2018, may be completed by January 31, 2018. The relief pertains to the same counties identified in news release TX-2017-09.

The deadline relief applies to the following actions.

  • Payment of PBGC insurance premiums (single and multi-employer plans)
  • Filing termination notices (single-employer plans)
  • Completing the distribution of plan assets (single-employer plans)
  • Filing post-distribution certification, Form 501 (single-employer plans)
  • Filing for distress termination, Form 601
  • Filing a reportable event notice
  • Filing Form 5500, Annual Return/Report of Employee Benefit Plan
  • Certain plans with underfunding, missed contribution, or funding waivers that must file special actuarial information within 15 days following the filing of their Form 5500, will have until January 31, 2018 for such filing.

DOL Weighs in on Retirement Plan Relief Regarding Hurricane Harvey

The Department of Labor (DOL) has issued guidance for retirement savings arrangements whose administrative procedures may have been disrupted in the wake of Hurricane Harvey in the Houston, Texas, area in recent days. News Release 17-1216-NAT presents additional compliance guidance for affected employee benefit plans. Also released is a set FAQs directed to plan participants and beneficiaries who are affected by this hurricane.

The DOL news release addresses the following.

 

Deposit of Deferrals and Loan Repayments

The general deadline for deferral deposits and loan repayments is as soon as can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the date they are withheld or are paid to the employer. The news release states that if a delay is due solely to the effects of Hurricane Harvey, enforcement action will not be taken if employers and service providers act reasonably, prudently, and in the interest of employees to comply as soon as practical.

 

Blackout Notices

In general, a retirement plan must give at least a 30-day notice prior to a blackout period of more than three consecutive business days. During a blackout period, participants are unable to direct investments, obtain loans, take distributions, etc. The notice points out that regulations provide an exception to the advance notice requirement when the inability to provide the notice is because of events beyond the reasonable control of the plan administrator, and a fiduciary so determines in writing. The news release further notes that natural disasters, by definition, are beyond the control of a plan administrator, and thus, the DOL will not allege a violation solely on the basis that a fiduciary affected by this disaster failed to make the required written determination.

 

Verification Procedures for Plan Loans and Hardship Distributions

News Release 17-1216-NAT states that the DOL is working with the IRS to provide relief with respect to verification procedures for plan loans and hardship distributions. (It is expected that good faith practices that are satisfactory to the IRS under its previously-issued Hurricane Harvey relief in Announcement 2017-11 will be satisfactory to the DOL.)

 

Form 5500 Filing

The DOL news release refers plans to IRS News Release TX-2017-09 for a description of the extension of time to complete certain time-sensitive tax-related acts in disaster situations, including the filing of Form 5500, Annual Return/Report of Employee Benefit Plan. Plans eligible for the extended filing deadline may do so as late as January 31, 2018.


Enhanced Access to Plan Loans and Hardship Distributions for Hurricane Victims

The IRS has issued Announcement 2017-11, describing special plan loan and hardship distribution options available to victims of Hurricane Harvey who participate or have participated in a qualifying retirement plan. The plans to which the guidance applies include

  • IRC Sec. 401(a) plans (e.g., 401(k)/profit sharing, money purchase, and target benefit plans),
  • 403(a) and 403(b) plans, and
  • governmental 457(b) plans.

In the case of a governmental 457(b) plan, an eligible Hurricane Harvey victim will be considered to have a qualifying unforeseen emergency, which generally would be the equivalent of a hardship under one of the other plan types.

Announcement 2017-11 notes that a plan that by law and regulations could allow for loan and hardship distributions, but does not contain the proper enabling provisions, may grant hardship distributions or loans pursuant to this announcement. The timeframe during which those requirements are disregarded is the period on or after August 23, 2017, and on or before January 31, 2018.

The specific conditions of Announcement 2017-11 follow.

  • The relief applies to an employee or former employee whose principal residence or place of employment—or that of a lineal ascendant, descendant, dependent, or spouse—is located in the officially-declared disaster area.
  • Plan administrators may rely on the employee’s or former employee’s representations of need and amount for hardship distributions (defined benefit and money purchase pension plans may only make hardship distributions from accounts that contain employee contributions or rollover amounts).
  • Hardship distributions under the terms of this guidance must be received during the period on or after August 23, 2017, and on or before January 31, 2018.
  • Distributions for hardship under this guidance are not limited to the generally “safe harbor” hardship reasons, and the 6-month suspension of deferrals will not apply. Hardship distributions of pretax assets remain subject to taxation and to the 10 percent additional tax for pre-59½ distributions in the absence of a qualifying exemption.
  • Loan amounts remain subject to the requirements of IRC Sec. 72(p), which includes, among other things, limitations on loan amounts available based on account balance or prior loans. The date by which such loan must be executed is not defined in Announcement 2017-11.
  • Plans that must be amended to provide for hardship distributions and loans under this guidance must do so by the last day of the first plan year beginning after December 31, 2017 (last day of 2018 plan year).
  • A good faith effort should be made to observe normal procedures and documentation requirements for loans and hardship distributions. If, however, they are disregarded under these special circumstances, then as soon as practicable, a reasonable attempt should be made to assemble any documentation that would have been required (e.g., spousal consent).

IRS guidance issued earlier this week identified the covered disaster area. Announcement 2017-11 will apply also to any additional areas in Texas or other states that are identified by FEMA as part of this disaster area.


IRS Issues Tax-Related Deadline Relief for Hurricane Harvey

The IRS has issued two news releases—IR-2017-135 and TX-2017-09—describing tax-related deadline relief available to Texas residents that have been affected by Hurricane Harvey. The area of Texas to which the relief applies at this time are the counties of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton.

The relief announced in IR-2017-135 announces that Hurricane Harvey victims in the affected areas have until January 31, 2018 to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15. The release also notes that individuals in other counties that Federal Emergency Management Agency (FEMA) might add to the disaster area will automatically receive the same relief.

TX-2017-09 goes beyond tax and payment deadlines to include other time-sensitive tax-related acts under Treasury Regulation 301.7508A-1(c)(1). These include completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation. Deadlines that fall on or after August 23, 2017, and before January 31, 2018, are extended to January 31, 2018.

The relief applies specifically to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area that was injured or killed as a result of the events is also entitled to deadline relief.

Affected taxpayers who reside or have a business located outside the covered disaster area also are required to call the IRS disaster hotline at 866-562-5227 to request relief.

The IRS issues disaster-related tax relief news releases at its disaster web page that identify the deadline extension period and specific areas included in the relief. Occasionally, the news releases are updated and revised, sometimes to expand the coverage area. See the IRS website for the most current news releases and their details.