Hurricane Sandy's devastation impacted more than just physical building structures. The Department of Labor and the Department of Treasury recognized that employers and their benefit plans, as well as participants and beneficiaries in those plans, can experience compliance-related issues when dealing with Hurricane Sandy's aftermath. Toward that end, both Departments issued limited relief for employee benefit plans, plan sponsors, and service providers located in one of the counties designated by the federal government as disaster areas.
IRS Relief. Employees and former employees may receive plan loans, hardship distributions and other distributions from 401(k), 403(b) and 457(b) plans. Specifically,
- Plans may rely on an employee's description of the need and amount of hardship distribution, unless the plan has actual knowledge otherwise;
- Defined contributions plans that do not provide for hardship distributions may make specific Hurricane Sandy-related distributions, so long as the plan is retroactively amended to provide for the distributions by the end of the first plan year beginning after December 31, 2012;
- Distributions may be made to participants impacted by Hurricane sandy for any hardship reason;
- Distributions must be made by February 1, 2013;
- Plans will be relieved from following specific loan and distribution requirements so long as the plan makes a good faith effort with respect to Hurricane Sandy distributions; and
- Post-distribution restrictions on plan contributions do not have to be applied to Hurricane Sandy distributions.
Department of Labor Relief. The Department of Labor piggybacked on the IRS' relief by stating that plans will not be considered to have violated ERISA due to compliance with the IRS Hurricane Sandy relief guidance. The Department of Labor also provided relief to employers and services providers who are not able to forward participant payments and withholdings to pension plans within required timeframes, are not able to issue timely blackout notices, or cannot meet certain filing deadlines due to Hurricane Sandy.
