By S. Derrin Watson, Esq.
In this Flashpoint, we are reviewing two current IRS releases that may be affecting you or your client’s plans: Relief for Hurricanes Ian and Fiona and the authorized delay in most required CARES amendments.
Hurricane Ian Disaster Relief
Hurricane Ian was a devastating storm affecting people and businesses in several states, particularly Florida. This Flashpoint summarizes the impact of the storm on retirement plans. The principles outlined here generally apply to other federal disasters. For example, similar relief applies to Puerto Rico with regard to Hurricane Fiona.
Extensions of time: The IRS has extended to February 15, 2023, a variety of tax deadlines for taxpayers affected by the hurricanes. Individuals who live in the disaster area and businesses with a principal place of business in the disaster area (which, in the case of the hurricanes, is the entire state) are all treated as affected taxpayers for deadlines that would otherwise apply beginning on the date of the disaster:
- Puerto Rico, September 17
- Florida, September 23
- South Carolina, September 25
- North Carolina, September 28
The deadlines that are extended are the same as those listed in Rev. Proc. 2018-58. These include the due dates for participant loan repayments, required minimum distributions (“RMDs”), contributions for deduction purposes, and rollovers.
Given the timing of the disaster, this extension is vital for Form 5500 filers. Very importantly, the due date of Form 5500 is specifically extended. This extension is not limited to businesses in the affected states. It also applies to “Taxpayers who are unable on a timely basis to obtain information necessary for completing the forms from a bank, insurance company, or any other service provider because such service provider’s operations are located in a covered disaster area.”
Example: Acme Plywood extended the due date of its 2021 Form 5500 to October 15, 2022. Acme is located in Florida. Acme has an automatic extension to file Form 5500 until February 15, 2023, even if Acme was unaffected by the storm (or made a profit on sales of plywood). The same would be true if Acme were in Montana, but its recordkeeper was located in Florida and was unable to timely provide the information needed for the return.
Congressional relief: Often, Congress adopts a relief package for victims of major “qualified” disasters, similar to the package provided with CARES. The last such package applied to disasters in 2020. While Congress may well consider such a relief package with regard to Ian or Fiona, it has not yet done so. For what it’s worth, there may be a more permanent solution coming in the future if one of the pieces of legislation being worked on in Congress – generally referred to as “SECURE 2.0” – is ultimately enacted.
Hardship distributions: There are now two hardship distributions that can apply to victims of the storms, depending on plan terms:
- Casualty losses: The safe harbor rules allow hardship distributions for “expenses for the repair of damage to the employee’s principal residence” caused as the result of a casualty, without regard to whether that casualty is in a federally declared disaster. This is limited to repair of the employee’s home and does not apply to homes of family members.
- Disaster losses: A new hardship allows distributions for “expenses and losses (including loss of income) incurred by the employee on account of a disaster” if the employee’s principal residence or place of business was in disaster area that qualifies for individual assistance under FEMA. Hurricane victims can get distributions covering damage to a home, a car, a business, and more. However, it only applies to areas qualifying for individual assistance. All of Puerto Rico qualifies, but only part of Florida does. The map at https://www.fema.gov/disaster/4673/designated-areas shows the Florida counties (in dark shading) that qualify. North and South Carolina do not qualify for individual assistance.
CARES Amendment Deadlines Extended
In Notice 2022-33, the IRS extended deadlines for employers to amend their plans for SECURE and the RMD provisions of CARES. Unfortunately, that extension did not include CARES provisions other than the 2020 RMD holiday. It did not include amendments related to coronavirus-related distributions, doubled loans limits, and loan extensions/ repayment suspensions.
The IRS has rectified this in Notice 2022-45. Huzzah! For most taxpayers, there is now a December 31, 2025, deadline to amend for:
- Miner’s Act
- 2020 Disaster Relief
For qualified plans sponsored by governmental employers, the deadline is 90 days after the conclusion of the third regular legislative session beginning after December 31, 2023. Typically, that moves the deadline to 2026. A similar deadline applies to public school 403(b) plans and to governmental 457(b) plans. Tax-exempt 457(b) plans must still amend by the last day of the 2022 plan year.
If you have any questions about the hurricane relief, the CARES extension, or anything else related to retirement plans, be sure to call us. After all, we are your ERISA solution!
- Posted by Ferenczy Benefits Law Center
- On November 4, 2022