Congress and Federal Agencies Help Plan Sponsors Respond to Hurricanes Harvey, Irma and Maria

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster Relief Act) signed into law on September 29, 2017, enables qualified retirement and 403(b) plan sponsors to offer certain plan participants affected by Hurricanes Harvey, Irma and Maria distributions and loans that are eligible for more generous limits and conditions than are otherwise applicable.1 The Internal Revenue Service (IRS), the Department of Labor (DOL), the Department of Health and Human Services (HHS) and the Pension Benefit Guaranty Corporation (PBGC) have issued guidance that will help plan sponsors respond quickly to the unique needs of the plans and of the participants and beneficiaries resulting from the damage inflicted by Hurricane Harvey.2 Similar guidance has been issued to assist victims of Hurricane Irma.3 We expect that additional relief will also be available to victims of Hurricane Maria, although some of the guidance has not yet been formally updated by the agencies.4 This Update summarizes the new law and guidance from those federal agencies.5

Disaster Relief Act

Under the Disaster Relief Act, plan sponsors may provide participants who live in a declared Hurricane Harvey, Irma or Maria disaster area, and who have losses because of the applicable Hurricane, more generous terms if they elect to take distributions or loans, including exemption from the 10 percent early withdrawal penalty tax, higher loan amounts and special rollover and repayment provisions. Additional requirements apply including designated time periods within which actions must be taken in order for the relief to apply. Guidance related to the Disaster Relief Act is expected to be released going forward. Plan sponsors should check the IRS webpage “Tax Relief in Disaster Situations” periodically to see if there is additional information on these relief measures. These provisions may be adopted without the need for immediate amendments.

IRS Guidance Regarding Loans and Hardship Distributions

Announcement 2017-11 liberalizes the 401(k) hardship distribution rules and streamlines loan procedures so that plans can provide participants with faster access to funds to help Hurricane Harvey victims. Announcement 2017-13 provides identical relief for Hurricane Irma victims. It appears likely that the IRS will issue a formal announcement providing identical relief for Hurricane Maria victims.6 These special rules apply to hardship distributions and loans that are made during the time periods and to the participants described in the table below.

Disaster Eligibility Criteria for Participants** Beginning of the FEMA Incident Period Hardship Distribution or Loan Period**
Hurricane Harvey As of the beginning of the Federal Emergency Management Agency (FEMA) incident period, at least one of the following was located in one of the counties (or Tribal Nations) identified as covered disaster areas:*

  • The principal residence of the participant or the participant’s lineal ascendant or descendant (generally son, daughter, parent or grandparent), dependent or spouse
  • The place of employment of the participant or the participant’s lineal ascendant or descendant (generally son, daughter, parent or grandparent), dependent or spouse
August 23, 2017 (for identified Texas counties) August 23, 2017 to January 31, 2018
Hurricane Irma September 4, 2017 (for identified Florida counties) September 4, 2017 to January 31, 2018
Hurricane Maria September 16, 2017 (for the U.S. Virgin Islands) September 17, 2017 (for Puerto Rico) September 16, 2017 to a Not-Yet-Announced Date for the U.S. Virgin Islands September 17, 2017 to a Not-Yet-Announced Date for Puerto Rico

* Information about covered disaster areas can be found on the FEMA website.

** Eligibility criteria, applicable dates and conditions for certain other types of relief are described under the Disaster Relief Act, above.


Under this guidance, eligible plans, generally 401(k) plans and 403(b) plans,7 are permitted to:

  • Make hardship distributions and loans before the plan has been amended for that purpose, provided that the plan is ultimately amended by the last day of the first plan year beginning after December 31, 2017 (by December 31, 2018 for calendar-year plans).
  • Make hardship distributions and loans to participants outside of the covered disaster areas so that they can assist affected relatives (sons, daughters, parents, grandparents), dependents or spouses who lived or worked in an identified area.
  • Make hardship distributions and loans without regard to certain procedural requirements (including certain documentation requirements) imposed by the plan, provided the plan makes a good-faith effort to comply with the requirements and provided the plan makes a reasonable attempt to assemble any missing documentation as soon as practicable.
  • Make hardship distributions for any reason arising from Hurricane Harvey or Hurricane Irma.8 Distributions do not have to be limited to the types of hardship reasons listed in the plan, even if the plan otherwise limits hardship distributions to the regulatory “safe-harbor” reasons. For example, distributions may be made for purposes of buying food and paying rent. In addition, plans do not have to impose post-distribution restrictions on contributions (i.e., the six-month ban on 401(k) or 403(b) contributions following hardship distributions when a plan uses the regulatory safe harbors for determining financial need and hardship reasons).
  • Rely on the representations of the participant with regard to the reason for and amount of any hardship distribution with respect to any eligible individual, absent actual knowledge to the contrary.

Announcements 2017-11 and 2017-13 do not change the maximum amount available for a hardship distribution under the plan under the IRC or related regulations or the statutory limits for loans, nor do they change the tax consequences of a hardship distribution or loan.9

The DOL Guidance

The DOL has published a helpful guide, “FAQs for Participants and Beneficiaries Following Hurricane Harvey,” which it has indicated also applies to Hurricane Irma.10 The guide addresses common questions participants may have with respect to both health and retirement benefits, such as what to do if a pension check is delayed or records are destroyed as a result of the storms.

The DOL has also issued compliance guidance for plans, plan sponsors and service providers (covered entities) located in a county identified for individual assistance by FEMA due to the effects of Hurricane Harvey or Hurricane Irma.11 The guidance confirms that the DOL will not treat any covered entity as having violated Title I of the Employee Retirement Income Security Act (ERISA) solely because the entity complied with the IRS Announcement with respect to verification procedures for hardship distributions, loans or other pension benefit distributions. In addition, the DOL guidance indicates that:

  • The DOL will not seek to enforce the contribution timing rules (i.e., the “earliest segregation date/no later than 15 days” rule) against plan sponsors or service providers in the covered disaster areas solely as a result of temporary delays in forwarding payments or contributions to plans, provided that the employers and service providers act prudently, responsibly and in the best interests of participants to comply with the requirements as soon as practicable.
  • The DOL will not allege a violation of the blackout period 30-day advance notice rules of ERISA §101(i) because of a temporary suspension of participants’ ability to direct investments, obtain loans or obtain other distributions from a plan where the lack of such notice is due solely to Hurricane Harvey or Hurricane Irma.
  • Because plan participants and beneficiaries may face problems meeting deadlines for claims filing and Consolidated Omnibus Budget Reconciliation Act elections, plan sponsors should act reasonably, prudently and in the interest of the workers and their families in making reasonable accommodations to prevent the loss of benefits because of failure to comply with timeframes. Similarly, the DOL will take physical disruption into consideration when enforcing compliance with claims or disclosure requirements by the plan or its service providers.

Employer Leave-Based Donation Programs

The IRS announced relief for leave-donation programs, which allow employers to make cash donations to charitable organizations on behalf of employees who elect to give up certain paid vacation, sick or personal leave. According to Notice 2017-48 (Harvey), Notice 2017-52 (Irma) and Notice 2017-62 (Maria), the leave donations will not constitute gross income or wages for the employees if employers send the money to charitable organizations described under §170(c), and payment is made before January 1, 2019.

Electing employees may not claim a charitable contribution deduction with respect to the value of their forgone paid leave.

The HHS Guidance

HHS has issued several bulletins concerning the severe disasters and public health emergencies created by the Hurricanes Harvey and Irma. HHS has waived certain sanctions and penalties under the Health Insurance Portability and Accountability Act (HIPAA) related to the HIPAA privacy rule, such as the requirements to obtain a patient’s agreement to speak with family members involved in the patient’s care. HHS has also restated how HIPAA privacy rules should be applied in emergency situations.12

Tax Filing Guidance

The IRS has provided additional guidance that postpones certain tax filings and payment deadlines until January 31, 2018, for plans, plan sponsors and plan service providers affected by Hurricanes Harvey, Irma and Maria.13 The guidance also provides relief with respect to related interest, late payment and late filing penalties for affected entities. Moreover, various deadlines for the employee benefit related acts listed in IRS Revenue Procedure 2007-56, Section 8 are postponed until January 31, 2018, for affected plans.

Certification and Funding-Related Guidance

The IRS, the DOL and the PBGC issued Notice 2017-49, which extends certain funding-related deadlines for affected plans if the principal place of business of the employer maintaining the plan or the employers employing more than 50 percent of the plan’s active participants, or if the worksite and location of the plan’s records, administrator, primary record keeper, or enrolled actuary or other advisor making funding determinations, are located in counties identified by FEMA for assistance.

Generally, deadlines for taking funding-related actions that fall between the beginning of the FEMA incident period and January 31, 2018, are postponed to January 31, 2018, including the following:

  • The minimum required contribution for the plan year,
  • Elections relating to prefunding balance or funding standard carryover balance,
  • Certification of the adjusted funded target attainment percentage, and
  • Furnishing a notice of benefit restriction.

The relief provided under the Notice also applies for purposes of Title IV of ERISA in determining timeliness of contributions and whether they are included in market value of assets.

The PBGC Relief Guidance

The PBGC also has provided relief to plans and plan sponsors in affected areas with respect to certain filing deadlines and penalties.14 The guidance is issued separately for each state in which certain areas have been designated as disaster areas, with those areas specified, and covers deadlines related to premium filings and other notices and filings. For single-employer plans, PBGC premiums that would otherwise be due to be paid on October 16, 2017 are now due on January 31, 2018, although interest will be added to the delayed payment of approximately 1 percent per quarter.

Additional Guidance Is Possible

Plan sponsors might wish to check the agency webpages devoted to disaster relief15 on a regular basis because the agencies have indicated that they will expand existing relief provisions and will add additional relief as necessary. Relief for victims of Hurricane Maria is likely to be formalized as soon as the agencies can do so. Also, the agencies have invited those affected by Hurricanes Harvey, Irma or Maria but not covered by any of the existing guidance to contact them directly to discuss individual relief on a case-by-case basis.

How Sibson Can Help

Sibson works with plan sponsors and their attorneys on compliance issues.

Sibson consultants can work with employers to determine if affected plans or plan participants would benefit from any of the agency-provided relief.

Sibson compliance consultants can assist in preparing documents necessary to implement relief programs such as leave-based donation programs, in drafting amendments to adopt relief provisions when necessary, and in preparing supporting documentation, such as application forms or certifications in order to support the administration of such programs.


To discuss this guidance, contact your Sibson consultant or the Sibson office nearest you.


1 When the Disaster Tax Relief Act (Public Law No: 115-63) is available online, it will be accessible from the Public and Private Laws page of the Government Printing Office website. Until then, refer to the House Bill (H,R. 3823) on Congress’s website.

2 The guidance is available on the Help for Victims of Hurricane Harvey page on the IRS website.

3 The guidance is available on the Help for Victims of Hurricanes Irma and Maria page on the IRS website.

4 A Recap of Key Tax Relief Provisions Available Following Harvey, Irma and Maria is available on the IRS website. At the time this Update was written, the agencies had started to issue guidance to address the evolving situation concerning the California wildfires. See guidance on the Tax Relief for Victims of Wildfires in California page on the IRS website and Disaster Relief Relating to PBGC Deadlines in Response to Wildfires in California.

5 In addition, for those affected by the hurricanes, the Centers for Medicare & Medicaid Services has announced special enrollment periods for 2018 Medicare coverage and coverage under the Affordable Care Act state Exchanges/federal Marketplace. We will cover that news in a subsequent Update.

6 See IR 2017-160, issued September 26, 2017

7 Defined benefit and money purchase plans may not make hardship distributions pursuant to Announcements 2017-11 and 2017-13 except from separate accounts, if any, containing rollovers or employee contributions.

8 Although guidance specific to Hurricane Maria has not yet been issued, IR 2017-160, which is subtitled “A Recap of Key Tax Relief Provisions Available Following Harvey, Irma and Maria,” issued September 26, 2017, appears to indicate that hardship distributions for any reason arising from Hurricane Maria also are permitted.

9 The Disaster Relief Act increased the maximum loan amount from $50,000 to $100,000. See the Disaster Relief Act regarding eligibility criteria, applicable dates and conditions for tax relief.

10 See DOL Release 17-1297-NAT, dated 9/15/2017.

11 See DOL Release 17-1216-NAT, dated 8/30/2017, extended to Hurricane Irma in DOL Release 17-1297-NAT, referenced in footnote 10. See DOL Release 17-1255-NAT, which states that the Employee Benefits Security Administration is working to extend relief to victims of Hurricane Maria.

12 See the Hurricane Harvey & HIPAA Bulletin and the Hurricane Irma & HIPAA Bulletin.

13 See these IRS News Releases: IR-2017-135 (August 28, 2017), IR-2017-150 (September 12, 2017) and PR-2017-02, (September 22, 2017) and VI-2017-02 (September 22, 2017).

14 See the Disaster Relief Announcements page on the PBGC website.

15 The IRS webpage is Tax Relief in Disaster Situations. EBSA’s webpage is Disaster Relief. The HHS webpage is HHS Hurricane Response Updates. The PBGC webpage is Disaster Relief Announcements.


Update is Sibson Consulting’s electronic newsletter summarizing compliance news. Update is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.



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News Highlights:

  • Congress and multiple federal agencies have taken steps designed to help victims of Hurricanes Harvey, Irma and Maria.
  • A new law allows plans to offer more generous terms to certain affected participants for certain retirement plan distributions and loans.
  • The agencies’ guidance is intended to ameliorate hardships experienced by participants and beneficiaries, as well as by plan administrators, in accessing benefits under health and retirement plans.