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Benefits

What Benefit Plan Compliance Relief Is Typically Offered After a Natural Disaster?

EBIA  

EBIA  

QUESTION: Our company is in an area that occasionally experiences severe weather events. We understand that federal agencies sometimes extend filing deadlines or offer other benefits-related compliance relief in connection with natural disasters. What types of relief are typically offered, and how can we determine the relief available for a particular event?

ANSWER: Federal agencies regularly issue guidance providing compliance relief following natural disasters such as hurricanes, floods, and wildfires. The relief varies, but it may include extensions of deadlines relating to COBRA, HIPAA, and the ERISA claims procedure requirements, and relief from specified retirement and welfare plan requirements. (Congress may also provide relief; see our Checkpoint article.) Typically, the agencies (IRS, DOL, and HHS) issue event-related guidance offering relief to employees and entities—such as plans, plan sponsors, plan service providers, and employers—in a specified area (e.g., counties identified for individual assistance by FEMA). But the entity seeking relief does not necessarily have to be in the disaster area. For example, a filing extension may be available if a filer outside of the disaster area is unable to obtain necessary information from a service provider in the affected area. And a plan sponsor in the disaster area may not be eligible for certain forms of relief if the plan is administered by a service provider in an unaffected location. Because the relief offered is not always the same, it is important to review the details of the guidance for each disaster.

The types of relief typically offered include—

  • Extensions. Deadlines may be extended for certain filings and payments, including quarterly payroll and excise tax returns, previously extended income tax returns, and Form 5500 filings, but generally not most information returns (see our Checkpoint article). And specified periods (e.g., the six-month period beginning on the date of the disaster) may be disregarded when determining certain plan-related time frames and deadlines (see our Checkpoint article). Extensions typically provide relief for—

    • COBRA. The specified period is disregarded when determining (1) the date for providing COBRA election notices; (2) a qualified beneficiary’s COBRA election period; (3) whether a qualified beneficiary’s COBRA premium payments are timely; and (4) the date by which individuals must notify a plan of a qualifying event or disability determination.
    • ERISA Claims Procedures. The timeframes for filing benefit claims and appeals of adverse benefit determinations under retirement plans and disability, group health, and other welfare plans are determined without regard to the specified period, as are the timeframes under group health plans for filing requests for external review and providing information to perfect incomplete requests for external review.
    • HIPAA. The specified period is disregarded when determining the 30- or 60-day period for requesting special enrollment.
  • Loans and Hardship Distributions. Disaster-related retirement plan loans and hardship distributions are permitted if certain requirements are met, including that the loan or distribution be made during a specified timeframe. Some otherwise applicable requirements may be waived (e.g., restrictions on post-distribution contributions) while other requirements may continue to apply (e.g., maximum amounts permitted for hardship distributions and Code § 72(p) requirements for participant loans). Also, plan amendments permitting the special loans or hardship distributions may be needed. The DOL may indicate that persons utilizing IRS relief for plan loans and hardship distributions will not be treated as having violated ERISA on that basis. (See our Checkpoint article.)
  • Other Retirement Plan Relief. Enforcement of some disaster-related violations may be waived, such as disaster-related delays in depositing participant contributions and some violations of the blackout notice requirements. (See our Checkpoint article.)
  • Leave-Based Donation Programs. Under a leave-based donation program, an employer may permit its employees to give up their vacation, sick, or personal leave in exchange for cash payments made by the employer to charitable organizations. Disaster-related guidance may provide that leave donations to benefit disaster victims made by a specified date and to a qualified organization will not constitute income to the donating employees, nor will the opportunity to make a leave donation result in constructive receipt of income for employees who do not make donations. (See our Checkpoint article.)
  • Group Health Plans. Fiduciaries may be expressly encouraged to make reasonable accommodations to prevent individuals affected by disasters from losing their health benefits. Recognizing that plans may encounter disaster-related compliance challenges, the DOL’s approach to enforcement may emphasize compliance assistance where appropriate. (See our Checkpoint article.)

The IRS and DOL both maintain disaster-relief webpages with helpful resources, including advice for individuals who may lose employer-provided health coverage or not receive a paycheck due to a disaster.

For more information, see EBIA’s ERISA Compliance manual at Sections XXII.F (“Form 5500 Mechanics: Who, What, When, and How”), XXXIV.F (“Timelines Under Group Health Claims Procedures”), and XXXV.E (“Timelines for Disability and Other Non-Health Decisions”). See also EBIA’s 401(k) Plans manual at Sections XV.H (“Special Hardship Rules for Disaster Relief”) and XVI.N (“Participant Loans: Special Rules for Disaster Relief”); EBIA’s COBRA manual at Sections XIV (“Checklist: COBRA Notices and Other Plan Communications”), XIX.D (“Tolling the Election Period”), and XXII (“COBRA Premiums: Payment Deadlines and Other Rules”); EBIA’s HIPAA Portability, Privacy & Security manual at Section X (“Special Enrollment Rights”); EBIA’s Self-Insured Health Plans manual at Section XXVI (“Claims and Appeals”); EBIA’s Fringe Benefits manual at Section XXII.E (“Leave-Sharing and Other Donation Programs”); and EBIA’s Cafeteria Plans manual at Section XXXVI.I (“Administering a Cafeteria Plan in the Event of a Disaster”).

Contributing Editors: EBIA Staff.

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