By S. Derrin Watson, Esq.
(Note: The following is a guest column from S. Derrin Watson, Esq. Mr. Watson will be speaking at the upcoming Orlando Advanced Pension Conference, on February 7-9, 2018)
A previous article (the “Harvey article”) discussed the relief given to those affected by Hurricane Harvey. Since then, Hurricane Irma has impacted millions of people. The IRS has provided the same relief to those affected by Irma as it gave to Harvey’s victims, and has announced new defined benefit funding relief for the victims of both disasters. This article updates the Harvey article to explain the new announcements, and to point out that the deadline to contribute 401(k) safe harbor employer contributions is not extended.
Code §7508A Relief. The IRS has granted Code §7508A relief to those affected by Hurricane Irma. The relief is the same as that for Hurricane Harvey, extending Form 5500 and other deadlines to January 31. The PBGC has also granted the same relief it gave regarding Hurricane Harvey. The relief is discussed in the Harvey article and applies:
· Beginning September 5 to taxpayers on the islands of St. John or St. Thomas in the US Virgin Islands (see VI-2017-01 and DR 2017-10),
· Beginning September 5 to taxpayers in the municipalities of Culebra and Vieques in Puerto Rico (see PR-2017-01 and DR 2017-12), and
· Beginning September 4 to specified counties in Florida (see FL-2017-04) and DR 2017-11).
The IRS adds that “Parts of Florida, Puerto Rico and the Virgin Islands are currently eligible, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief.” (See IR-2017-150.)
Hardship and Loan Relief. The IRS has also granted to those affected by Irma the same hardship and documentation relief for loans and distributions offered to those affected by Harvey. (See Announcement 2017-13.) This will allow participants who reside or work in the disaster area, or had an ancestor, descendant, spouse, or dependent residing or working in the disaster area, to receive hardship distributions on account of Irma from a plan which allows those distributions. See the Harvey article for a full discussion.
Defined Benefit Funding Relief. Rev. Proc. 2007-56 lists many retirement plan deadlines automatically extended as a part of Code §7508A relief. Unfortunately, some keys issues are not on the list. Code §7508A disaster relief does not normally provide any extension of the funding requirements for defined benefit plans.
The IRS, DOL, and PBGC are jointly providing relief relating to those funding requirements with Notice 2017-49. The relief extends key funding deadlines to January 31, 2018 for “Affected Plans” for both Harvey or Irma.
A plan is an “Affected Plan” if any of the following is in the “Affected Area”
· The principal place of business of the sponsor if the plan covers only one employer;
· The principal place of business of employers that cover more than 50% of the active participants if the plan covers more than one employer;
· The relevant office of the plan or the plan administrator;
· The relevant office of the plan’s primary record keeper; or
· The office of the enrolled actuary or other advisor that the plan or the employer had previously retained to make funding determinations or certifications for which the due date falls between the beginning of the incident and January 31, 2018.
In determining principal place of business and whether the plan is maintained by more than one employer, disregard the controlled group and common control rules of Code §414(b) and (c). Interestingly, the Notice does not discuss the affiliated service group rules of Code §414(m).
Example 1: Corporation S has its principal office in the Irma disaster area. S is a wholly-owned subsidiary of Corporation P, with offices outside the disaster area. S sponsors a plan exclusively for its employees. The S plan is an Affected Plan.
Example 2: Assume the same facts as Example 1 except P sponsors the plan and it covers employees of P and its subsidiaries. The plan covers the employees of more than one employer (disregarding the controlled group rules). Only 25% of the active participants in the plan have their principal place of business in the Irma disaster area. On these facts, the plan is not an Affected Plan and is not eligible for the defined benefit funding relief.
Example 3: Assume the same facts as Example 2. The plan’s record keeper is in the Harvey disaster area. The plan is an Affected Plan.
The Affected Area is the set of jurisdictions FEMA has identified for individual assistance for Harvey or for Irma. These are the same areas that qualify for 7508A relief. The relief applies to deadlines from the beginning of the incident (August 23 for Texas counties affected by Harvey and September 4 for Florida counties affected by Irma) until January 31, 2018.
Example 4: Continuing Example 1, Corporation S has a calendar year defined benefit plan. The September 15 deadline under Code §430(j) for making the minimum required contribution is extended to January 31, 2018. So, also, are the deadlines to make quarterly installments normally due October 15, 2017 and January 15, 2018. So, also, is the deadline for the certification of the plan’s AFTAP and for providing participant notices under ERISA §101(j). The corresponding ERISA deadlines are also extended. These extensions also apply under PBGC rules to determine the timeliness of a contribution and whether that contribution is included in the market value of assets.
There are corresponding extensions for CSEC plans and multiemployer plans.
Example 5. Corporation X sponsors a single-employer defined benefit plan and wishes to request a waiver of the minimum funding requirements for the plan year ending June 30, 2017. The September 15 deadline to apply for the waiver is extended to January 31, 2018.
Safe Harbor Contributions Not Extended. There are still several retirement deadlines that have not been extended. One of the most important of these is the 401(k) safe harbor contribution deadline. Normally the deadline for an employer to deposit a safe harbor contribution is twelve months after the end of the plan year. There is no disaster extension of this period.
Example 6. Sole proprietor A maintains a safe harbor 401(k) plan providing a 3% safe harbor nonelective contribution and a discretionary profit-sharing contribution. The due date of the A’s 2016 tax return was extended to October 15, 2017. A resides in Houston, Texas. The due date to make the 2016 safe harbor contribution is December 31, 2017, even though the due date to contribute the 2016 profit sharing contribution (and have it be deductible in 2016) is January 31, 2018.
--------------------------------------------------------------------------
403(b) Plans for 401(k) Administrators Workshop and
403(b) Prototype Document Workshop (2-day program)
Registration is open!
Presented back-to-back -- Denver on October 9-10-11, Kansas City on October 9-10-11, Atlanta on October 16-17-18, Chicago on October 16-17-18, Boston on October 30-31-Nov 1, Dallas on October 30-31-Nov 1, Portland on November 6-7-8, and Pittsburgh on November 13-14-15.
Details and online registration, here: http://www.relius.net/Events/events.aspx?Seminar
2018 Orlando Advanced Pension Conference – February 7-9 – Save the dates
Plus, Just for ERPAs Workshop – February 6, 2018
Hard Rock Hotel® at Universal Orlando®.
Program details and registration will be available in November 2017, here.
Pensions on Peachtree – Atlanta, GA – April 23-24 2018 – Save the dates
Program details and online registration will be available in February 2018, here. |
