The IRS and DOL both recently published guidance containing some relief for those individuals and businesses in designated Texas counties that have been impacted by Hurricane Harvey. Specifically, the IRS offered extensions for certain tax filing deadlines that applies automatically to any individual or business who resides with the affected Texas counties (as outlined in the notice). As a result, if a form was due on or after Aug. 23, 2017, the form is now due on Jan. 31, 2018. The relief would apply to those employers that may have previously applied for a Form 5500 filing extension (either automatically or via Form 5558), as well as for any quarterly payroll/employment/excise tax filings due. Employers should work with their broker and/or professional accountant (or outside tax counsel) when it comes to appropriately filing extensions.
The IRS also published Notice 2017-48, which provides guidance on income and employment tax purposes on the treatment of cash payments made by employers under leave-based donation programs for the relief of Hurricane and Tropical Storm Harvey victims. Generally, under leave-based donation programs, employees can elect to forego vacation, sick or personal leave in exchange for cash payments that the employer makes to a charitable organization. According to the notice, the IRS will not assert that cash payments made under leave-based donation programs constitute income or wages of the employees if the payments are made in conjunction with Hurricane and Tropical Storm Harvey and are made before Jan. 1, 2019. Employers should work with tax counsel or their CPA in determining the appropriate tax accounting and reporting for those types of cash payment contributions.
According to the guidance, disaster extensions permitted by the IRS are also permitted by the DOL — meaning the DOL will not impose penalties where a Form 5500, for example, is filed by the relief extension due date. The related guidance specifically states that the postponement does not apply to most information return filings, such as Forms W-2, 1094 and 1095. Those forms will still be due on the relevant deadlines in 2018.
In a press release, the DOL encouraged employers and plans to make reasonable accommodations to prevent the loss of benefits for participants and beneficiaries affected by Hurricane Harvey. Examples include a delay on filing a benefit claim or in providing a COBRA election notice. The DOL also explained that its compliance enforcement strategy will emphasize compliance assistance where the situation proves impossible or difficult due to the aftermath of Hurricane Harvey. In other words, the DOL will be understanding in compliance challenges and delays that arise out of complications from the hurricane.
The DOL has also published FAQs for plan participants and beneficiaries which offer advice for those who may have complications with their health insurance or retirement plans in the face of Hurricane Harvey. The FAQs may serve as a helpful resource for employers with employee questions on those issues as they try to recover from the hurricane’s impact in Texas.
For retirement plans, IRS Announcement 2017-11 permits retirement plans to provide loans and hardship distributions for those impacted by Hurricane Harvey, so long as certain requirements are met. Specifically, to be eligible for such a loan/distribution, on Aug. 23, 2017, the individual must have had a principal residence or place of employment in an affected Texas county. Alternatively, an individual is eligible if they have a lineal ascendant or descendant, dependent or spouse with a principal residence or place of employment in the affected area. The loan/distribution must be made no later than Jan. 31, 2018. While loans/distributions made pursuant to Announcement 2017-11 are excused from some IRS rules, others – including maximum amounts and other loan requirements – remain in place. Plans that want to make disaster-related loans/distributions have until the end of the first plan year beginning after Dec. 31, 2017, to make appropriate plan amendments.
The IRS and DOL guidance is particularly helpful for Texas employers that may have been impacted by Hurricane Harvey. Those employers should work with their advisor/account management team and, in some instances, outside counsel for specific questions relating to the guidance and relief.
IRS Announcement 2017-11 »
IRS IR 2017-135 »
IRS TX 2017-09 »
IRS Notice 2017-48 »
DOL News Release »
DOL FAQs »