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President Bush signs Katrina Tax Relief Bill. On September 23, 2005, President Bush signed into law a $6.1 billion emergency tax relief bill for victims of Hurricane Katrina and employers in the affected region. The Katrina Emergency Tax Relief Act of 2005 (HR 3768) also provides tax incentives for charitable giving. The hurricane relief measure includes provisions that hold Katrina victims harmless against the loss of various tax benefits due to temporary displacement and create a special tax deduction for individuals who provide rent-free housing for Katrina evacuees. It waives the 10-percent tax on early distributions from IRAs and pensions for individuals affected by the storm and ensures that Katrina victims are not taxed on personal debt relief related to the hurricane, such as the cancellation of a mortgage. The new law also creates a new target group under the Work Opportunity Tax Credit (WOTC), called Hurricane Katrina employees. Employers who hire Katrina employees are allowed to claim the WOTC which generally equals 40 percent of the first $6,000 of wages paid to a new worker in the first year. Other provisions extend the deadline for paying excise and employment taxes.
President Bush signs emergency legislation to help federal courts in Louisiana. President George W. Bush has signed emergency legislation to let two federal courts based in New Orleans resume operations. The bill allows the US District Court and the US Bankruptcy Court for the Eastern District of Louisiana to conduct court business outside of the district's geographic boundaries.
District courts to relocate. The legislation will enable the district court's judges and employees to relocate in three separate sites away from New Orleans – Baton Rouge in the Central District, Lafayette in the Western District, and Houma in the Eastern District. Preparations coordinated by the Administrative Office of the United States Courts are underway to move about 60 district court judges and employees to Lafayette, where the federal Judiciary has leased space. About 35 persons will be relocated in Houma, and about a dozen in Baton Rouge. Filing deadlines in the district court have been suspended. For more information, check the court’s website at: http://www.laed.uscourts.gov.
The bankruptcy court also lost its home when the federal building it occupied was flooded. About 35 members of that court family are being relocated to Baton Rouge, where they will share work space with the bankruptcy court for the Middle District of Louisiana. To check about filings in that court, go to its web site: http://www.laeb.uscourts.gov.
The House of Representatives voted 409-0 for the legislation on September 7, 2005. The Senate passed it by unanimous consent on September 8th, and it was quickly sent to the White House for the President's signature. The President signed the legislation on September 9, 2005. The Judicial Conference of the United States, which makes policy for the federal courts, had asked Congress for the legislation to address the jurisdictional problem. The new law will allow any district or bankruptcy court to do likewise when emergency circumstances require it.
Fifth Circuit Court of Appeals. In addition, the US Court of Appeals for the Fifth Circuit, which handles appellate cases from Louisiana, Texas, and Mississippi was forced from its primary home in the John Minor Wisdom US Courthouse in New Orleans. The circuit court is in the process of relocating to Houston for three months, and then relocating to Baton Rouge. More than 80 employees of the circuit clerk's office will transfer to Houston, along with 14 members of the circuit executive's staff, several staff attorneys and nine automation employees.
The circuit court is scheduled to reopen for business in Houston, Texas on September 14, 2005. All filing deadlines on or after August 24 through September 30 are automatically extended until October 3, 2005. For more information, check the appeals court's website at: http://www.ca5.uscourts.gov/news/news/CourtInformation-09022005.htm
Mississippi courts. In the Southern District of Mississippi, federal courthouses in Gulfport and Hattiesburg were closed due to damage caused by Hurricane Katrina. Court operations in both courthouses are likely to be suspended for several weeks.
Alabama courts. In the Southern District of Alabama, both the district and bankruptcy courts resumed operations in the John A. Campbell US Courthouse in Mobile, Alabama. Power and telephone service have been restored in the federal defenders' office, as well as a DSL line allowing Internet access.
DHS issues notice regarding I-9 documentation for hiring Hurricane Katrina victims. The Department of Homeland Security (DHS) has announced that it will not sanction employers for hiring victims of Hurricane Katrina who are currently unable to provide documentation normally required under Section 274A of the Immigration and Nationality Act. The DHS will not bring sanction actions against employers for hiring individuals evacuated or displaced as a result of Hurricane Katrina otherwise eligible for employment but who currently lack personal documents.
US employers are responsible for completing and retaining Employment Eligibility Verification (I-9) Forms for individuals they hire for employment. This form requires employers to verify employment eligibility and establish identity through original documents presented by the employee. For victims of Hurricane Katrina, many individuals lack these documents as a result of being evacuated from their homes, loss or damage to personal items and records, and ongoing displacement in shelters and temporary housing. Additionally, as a result of the widespread damage and destruction to government facilities in the area affected by the hurricane, it can be expected that many victims will be unable to apply for and receive new documents in the period of time required by the employment verification rules.
Therefore, the DHS will refrain from initiating employer sanction enforcement actions for a period of 45 days starting on September 6, 2005 for civil violations, under Section 274A of the Immigration and Nationality Act, with regard to individuals who are currently unable to provide identity and eligibility documents as a result of the hurricane. Employers will still need to complete the Employment Eligibility Verification (I-9) Form as much as possible but should note at this time that the documentation normally required is not available due to the events involving Hurricane Katrina. At the end of the 45-day period, the DHS will review this policy and make further recommendations. For more information on DHS activities please see its website at: http://www.dhs.gov/dhspublic/index.jsp.
EEOC provides information to EEOC stakeholders affected by Hurricane Katrina. The US Equal Employment Opportunity Commission (EEOC) has provided the following information for potential charging parties, current charging parties, respondents and parties to the federal complaint process in connection with the devastation caused by Hurricane Katrina. The EEOC's New Orleans District Office (701 Loyola Avenue) is closed and will remain so until further notice. The EEOC asks that individuals not attempt to contact staff at that location at this time. Anyone with questions about a case being handled by the New Orleans District Office should call (202) 663-4749.
Filing of charges and general inquiries. Individuals who believe that they may have experienced employment discrimination in the state of Louisiana during the last 300 days, and have not yet filed a charge of discrimination, should contact the EEOC’s National Contact Center. The center can be reached by telephone toll-free at (800) 669-4000 voice or (800) 669-6820 TTY; by mail at P.O. Box 7033, Lawrence, KS 66044; by fax at (703) 997-4890; or by email at firstname.lastname@example.org. Customer service representatives are prepared to address a range of inquiries, including the federal laws enforced by this agency and how to file a charge. Callers who wish to file a charge and others requiring immediate attention may be directed to another EEOC field office for further assistance. If you cannot reach the National Contact Center by telephone, please try calling the Houston District Office at (713) 209-3372.
Parties to open EEOC charges. Charging parties are advised that investigations and determinations regarding open charges of discrimination filed with the EEOC's New Orleans District Office are suspended until further notice. Respondents (employers, labor organizations and employment agencies) to open charges of discrimination filed with the New Orleans District Office may have been requested to supply information (for example, data, witness statements, affidavits, attendance records, etc.) by an impending due date. A blanket extension for submission of any and all documents is granted until further notice.
Federal sector stakeholders. Federal complainants and agencies with cases pending before the EEOC's New Orleans District Office are advised that all mediations, settlement conferences and hearings are postponed until further notice, as are deadlines for motions, submissions of investigative files and general correspondence. The administrative judge or mediator responsible for a case will contact the parties when the office reopens. Similarly, individuals wishing to request hearings before administrative judges are advised that deadlines are postponed until further notice.
The EEOC intends to provide another update for EEOC stakeholders by October 3, 2005 on its website at: http://www.eeoc.gov/katrina/stakeholders.html.
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President Bush suspends Davis-Bacon Act post-Katrina. President Bush issued a Proclamation suspending the prevailing wage provisions of the Davis-Bacon Act in geographic areas affected by Hurricane Katrina. The proclamation suspends Section 3142 of U.S. Code title 40, which provides for prevailing wage standards for federal government construction contracts. Under the Act, federal construction contracts in excess of $2,000 must pay workers under those contracts the area "prevailing wage" under a wage determination for the various classes of workers.
Under Section 3147, the President has authority to suspend the Act during a national emergency. "An unprecedented amount of Federal assistance will be needed to restore the communities that have been ravaged by the hurricane," the Proclamation notes. "Accordingly, I find that the conditions caused by Hurricane Katrina constitute a 'national emergency' within the meaning of section 3147 of title 40, United States Code." The Proclamation states that the hurricane has resulted "in unprecedented property damage," and that prevailing wage rates increase the government's cost of providing federal assistance in the stricken areas. "Suspension of the [provision]. . . will result in greater assistance to these devastated communities and will permit the employment of thousands of additional individuals." The suspension applies to contracts to be performed in certain counties of Alabama, Florida, Mississippi, and Louisiana parishes; the suspension will remain in place "until otherwise provided."
NLRB New Orleans, Louisiana office temporarily closed due to Hurricane Katrina. National Labor Relations Board Acting General Counsel Arthur F. Rosenfeld has announced that the Board's New Orleans, Louisiana Regional Office (Region 15) has temporarily closed due to the flooding and damage in New Orleans and the interruption of electrical power and telephone service resulting from Hurricane Katrina. Because of the current disaster recovery conditions in New Orleans, it is presently uncertain when the New Orleans Regional Office will be able to reopen. Acting General Counsel Rosenfeld advised that employers, unions and individuals served by the New Orleans Regional Office should call the Board's Memphis, Tennessee Regional Office (Region 26) to seek telephonic assistance or mail charges, petitions or other documents to the Memphis Office while the New Orleans Office is closed. The Memphis Regional Office is located at The Brinkley Plaza Building, Suite 350, 80 Monroe Avenue, Memphis, Tennessee 38103-2481; the telephone number is (901)544-0018; and the fax number is (901)544-0008. During the coming week, the staff of the New Orleans and Memphis Regional Offices will be attempting to contact parties with respect to any hearings or elections that are currently scheduled to determine whether the matters should be rescheduled.
DOL sets up web-based job resource center to aid Katrina victims. The Department of Labor (DOL) has set up the job resource center on the web — The Katrina Recovery Job Connection. The website is designed to assist three specific areas: 1) individuals seeking new, full-time employment either in their home state or in a new state; 2) individuals wishing to assist in the clean-up and rebuilding efforts through temporary employment; and 3) employers who want to list jobs supporting hurricane recovery efforts or want to hire workers affected by the hurricane. The Katrina Recovery Job Connection can be found at http://www.jobsearch.org/katrinajobs or through America's Job Bank at http://www.ajb.org and click on Katrina Jobs.
While the site is intended to complement efforts at the state and local levels, it is also intended to make individuals evacuated to other states aware of opportunities in their home state. The site allows employers to post jobs and job seekers to search for job opportunities and post their resumes.
In addition, Monster.com, in partnership with the NAM, has also set up a Web site for employers and prospective employees at: http://hurricanerelief.monster.com/. Employers can post jobs for dislocated victims of Katrina at no cost. If you would like to post a job associated with the reconstruction effort, or would like to hire those impacted by the hurricane, please call (1-800) Monster for a FREE job posting. All free job postings must be for positions created as a direct result of the hurricane or those designed exclusively for hurricane victims. If you have multiple jobs to post, please contact email@example.com and Monster will contact you to help streamline the process.
DOL's Office of Administrative Law Judges announces closing due to Hurricane Katrina. The DOL’s Office of Administrative Law Judges has announced that its Metairie, Louisiana (New Orleans) location is closed until further notice due to hurricane Katrina. Hearing schedules for locations in the Gulf Coast area, or hearings in other parts of the country in which an Administrative Law Judge (ALJ) from Metairie was to preside, will be adjusted as necessary. Litigants who need to file documents with a Metairie ALJ should direct those filings to the Washington, D.C. office until further notice. In addition, any questions about the status of matters before the Metairie should be directed to the Washington, DC office: Office of Administrative Law Judges. United States Department of Labor. Suite 400 North. 800 K Street, NW. Washington, DC 20001-8002
(202) 693-7542; (202) 693-7385 (FAX)
OLMS issues guidance for unions in the areas affected by Hurricane Katrina. The US Department of Labor's Office of Labor-Management Standards (OLMS) has issued guidance for unions in the areas affected by Hurricane Katrina regarding the reporting requirements under Section 201 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). Due to the property damage and destruction inflicted by the storm it may be difficult or impossible for some labor organizations in the affected areas to file timely LM-2, LM-3 or LM-4 reports. Therefore, the Department of Labor will not take any enforcement action relating to labor organizations whose principal offices are located in the affected areas, or those whose financial records necessary for preparing the forms are located in those areas. Using its enforcement discretion, OLMS will not take action before March 31, 2006 to compel the filing of delinquent Form LM-2, LM-3, and LM-4 reports which were due on or after August 29, 2005. The affected regions covered under this advisory are those counties officially declared disaster areas by President Bush.
This advisory covers labor organizations whose principal office or financial records are located in the following: the counties of Baldwin, Choctaw, Clarke, Mobile, Sumter, and Washington in the State of Alabama; the counties of Broward, Miami-Dade, and Monroe in the State of Florida; the parishes of Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, La Salle, Lafayette, Lafourche, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana, and Winn in the State of Louisiana; and the counties of Adams, Alcorn, Amite, Attala, Benton, Bolivar, Calhoun, Carroll, Chickasaw, Choctaw, Claiborne, Clarke, Clay, Coahoma, Copiah, Covington, DeSoto, Forrest, Franklin, George, Greene, Grenada, Hancock, Harrison, Hinds, Holmes, Humphreys, Issaquena, Itawamba, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lafayette, Lamar, Lauderdale, Lawrence, Leake, Lee, Leflore, Lincoln, Lowndes, Madison, Marion, Marshall, Monroe, Montgomery, Neshoba, Newton, Noxubee, Oktibbeha, Panola, Pearl River, Perry, Pike Pontotoc, Prentiss, Quitman, Rankin, Scott, Sharkey, Simpson, Smith, Stone, Sunflower, Tallahatchie, Tate, Tippah, Tishomingo, Tunica, Union, Walthall, Warren, Washington, Wayne, Webster, Wilkinson, Winston, Yalobusha, Yazoo in the State of Mississippi.
DOL requests information from the public on fiduciary responsibility guidelines. The Office of Labor-Management Standards (OLMS) will publish a Request for Information in Monday's Federal Register to solicit public comments on whether the Labor Department should issue guidelines on section 501(a) of the Labor-Management Reporting and Disclosure Act (LMRDA). Section 501 imposes a fiduciary obligation on officers, agents, shop stewards and other representatives of labor organizations.
To date, the department has not, as a matter of policy, addressed what constitutes a breach of fiduciary duty under section 501 because legal remedies for such breaches must be initiated by individual union members rather than by the department. In this era of increased financial integrity, it is important that there be accountability and transparency so that union members have the most accurate and helpful information available to them," said Victoria A. Lipnic, assistant secretary for employment standards.
The department will also seek comments on the nature and scope of fiduciary obligations under Section 501, which states in general terms that officers, agents, shop stewards, and other representatives of a labor organization occupy "positions of trust" within their labor organizations and must act in the best interests of the union. While the LMRDA does not describe in complete detail the nature and scope of the fiduciary duties of union officials, the legislative history indicates that a broad interpretation of duty should be applied. Comments must be received on or before October 28, 2005, and should be identified by RIN 1215-AB52. Comments can be e-mailed to OLMS-REG-1215-AB52@dol.gov; faxed to (202) 693-1340, or mailed to Kay H. Oshel, Director of the Office of Policy, Reports and Disclosure, Office of Labor-Management Standards, US Department of Labor, 200 Constitution Ave., N.W., Room N-5605, Washington, D.C. 20210. For information on commenting, please contact: Kay H. Oshel at the above address; firstname.lastname@example.org or (202) 693-1233 (not a toll-free number). Individuals with hearing impairments may call 1-800-877-8339 (TTY/TDD).
NLRB appoints David Goldman and Mindy Landow Administrative Law Judges. The National Labor Relations Board (NLRB) has announced the appointment of two new administrative law judges, David Goldman and Mindy Landow. Judges Goldman and Landow transferred to the Board from similar positions with the Social Security Administration (SSA). Their appointments bring the number of judges in the Board's Division of Judges to 50 nationwide. The Division of Judges, which has offices in Washington, D.C., New York City, San Francisco and Atlanta, is responsible for docketing unfair labor practice cases brought by the Board's General Counsel on charges filed by unions, employers and individual employees. The Judges Division disposes of those cases, either by settlement or by conducting trials and issuing initial decisions, which may then be appealed to the five-member Board and thereafter to an appropriate U. S. Court of Appeals. Before Judge Goldman became a judge at SSA in 2004, he worked as an attorney in the NLRB's Appellate Court Branch and served for 16 years as an Assistant and Associate General Counsel for the United Steelworkers of America. He received his B.A. degree from the University of North Carolina in 1983 and his J.D. degree from Columbia University in 1988. Judge Landow was named a judge with the SSA in 2004. Previously, she served as a trial attorney in the NLRB's Manhattan office (Region 2) for 15 years, and she was in the private practice of law in New York City. Judge Landow received her B.A. degree from the State University of New York in Binghamton in 1973 and her J.D. degree from New York University in 1987. Judge Goldman will take his assignments from the Washington office of Judges, while Judge Landow will be based in New York.
Schaumber granted recess appointment to continue serving on NLRB. President Bush, on August 31, 2005, made a recess appointment of Peter Schaumber to serve on the National Labor Relations Board. Previously, on June 29, 2005, the President had nominated Schaumber to serve as a member of the NLRB for a term of five years expiring August 27, 2010. The recess appointment means that Schaumber can serve until the end of the next session of Congress. In light of Schaumber's appointment, the NLRB will not be forced to make rulings with only two members. Before the expiration of Schaumber's last term on August 27, the NLRB's remaining members had decided to delegate to themselves, as a three-member group, all of the Board's powers. This action would have permitted the remaining two Members, Chairman Robert J. Battista and Member Wilma B. Liebman, as a quorum of the three-member group, to issue decisions and orders in unfair labor practice and representation cases.
OFCCP waives some affirmative action requirements in light of Hurricane Katrina. A memorandum posted on the Office of Federal Contract Compliance Programs (OFCCP) website states that OFCCP Director Charles James, Sr. has decided to grant a limited exemption and waiver from some of the requirements of the laws administered by the OFCCP in light of "the special circumstances in the national interest presented by the destruction caused by Hurricane Katrina." These exemption and waivers relate to the requirements to develop written affirmative action programs under OFCCP regulations implementing the three laws (Executive Order 11246, as amended, Section 503 of the Rehabilitation Act, as amended, and Section 4212 of the Vietnam Era Veterans' Readjustment Assistance Act, as amended) enforced by the OFCCP. Federal contractors will continue to be subject to the nondiscrimination requirements under those laws.
The memorandum provides three equal employment opportunity clauses that federal contracting agencies may utilize in covered contracts entered into to provide Hurricane relief. The exemption and waiver will be for a period of three months, subject to an extension "should special interests in the national interest so require," and will pertain only to the three programs administered by OFCCP. Notwithstanding the exemption and waiver, the following regulatory requirements will continue: (1) posting of the "Equal Opportunity is the Law" notice; (2) record keeping and record retention; and (3) employment listings with appropriate local employment service office.
The following bills introduced over the month would:
- repeal the authority of the President to suspend the prevailing wage requirements of the Davis-Bacon Act during times of national emergency and to reinstate the application of such requirements to federal contracts in areas affected by Hurricane Katrina (Support for Wage Rate Requirements During Emergencies, H 3834. Introduced 9/15/05 by Rep. Frank Pallone, Jr., D-NJ. Referred to Education Committee).
- provide workers with certain impairments employment protection. (H. 3652. Introduced 9/06/05, by Rep. Robert E. Andrews, D-NJ. Referred to Transportation Committee)
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EBSA extends Form 5500 deadline relief for Hurricane Katrina Victims to February 28, 2006. The Department of Labor's Employee Benefits Security Administration (EBSA) extension of the deadline for filing Form 5500 and Form 5500 EZ annual report/returns due to property damage and destruction from Hurricane Katrina in Mississippi.
President Bush has declared a major disaster in 15 counties in Mississippi due to the damage caused by the hurricane. The extension applies to plan administrators, employers and other entities located in the areas directly affected, as identified by the Federal Emergency Management Agency. The extension also applies to firms located outside the affected areas who are unable to obtain the necessary information from service providers, banks or insurance companies whose operations were directly affected by the hurricane. If the President declares additional counties eligible for individual assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, this extension will also apply to them. Under this relief, Form 5500 series filings required to be filed between Aug. 29, 2005, and Jan. 3, 2006, are granted an extension until Feb. 28, 2006. Plan filers entitled to an extension of relief should check Part I, Box D, on the Form 5500 or Part 1 on Form 5500-EZ and attach a statement to the form in accordance with the instructions.
The agencies – EBSA, Internal Revenue Service and Pension Benefit Guaranty Corporation – realize that, due to this natural disaster, there may be instances when full compliance may not be possible. The guiding principle must be to ensure that appropriate efforts are made to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, pension and other benefits for their physical and economic well-being. For more information about disaster relief, contact the Federal Emergency Management Agency at 1-800-621-3362 or (202) 621-FEMA or the Internal Revenue Service at www.irs.gov under "Disaster Area Tax Relief." Filers who have additional questions may contact EBSA's EFAST Help Line at 1-866-463-3278.
EBSA enforcement policy on 401(k) blackout notices after Hurricane Katrina. EBSA, in conjunction with IRS Announcement 2005-70, provided guidance to facilitate hardship and loan distributions to participants and beneficiaries affected by Hurricane Katrina. In addition to the distribution issues addressed in the IRS Announcement, EBSA has received inquiries concerning the application of rules governing participant contributions and loan repayments and the furnishing of blackout notices to employers and plans in areas affected by the Hurricane. EBSA realizes that, due to this natural disaster, there may be instances when full compliance may not be possible. The guiding principle must be to ensure that appropriate efforts are made to act reasonably, prudently and in the interest of the workers and their families, who rely on their health, pension and other benefits for their physical and economic well-being.
Participant contributions and loan repayments. In accordance with 29 CFR 2510.3-102, amounts that a participant or beneficiary pays to an employer or amounts that a participant has withheld from his or her wages by an employer for contribution to an employee pension benefit plan constitute plan assets, and thereby are required to be forwarded to the plan, on the earliest date on which such amounts can reasonably be segregated from the employer's general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer. In Advisory Opinion No. 2002-02A (May 17, 2002), the Department took the position that these same principles apply to amounts paid to or withheld by an employer for purposes of repaying a participant loan to a pension plan.
The Department recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in designated affected areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the Department will not, solely on the basis of a failure attributable to Hurricane Katrina, seek to enforce the provisions of title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practical under the circumstances.
Blackout notices. In general, section 101(i) of ERISA and the regulations issued thereunder, at 29 CFR 2520.101-3, provide that the administrator of an individual account plan is required to provide 30 days advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited or restricted by a blackout period (i.e., a period of suspension, limitation or restriction of more than three consecutive business days on a participant's ability to direct investments, obtain loans or obtain other distributions from the plan). The regulations provide an exception to the advance notice requirement when the inability to provide the advance notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing.
Natural disasters, by definition, are beyond the control of a plan administrator. With respect to plans affected by Hurricane Katrina, the Department will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination. EBSA will continue to analyze the situation and will consider any additional guidance necessary to assist affected participants, beneficiaries, employers and plan sponsors as they work to recover from Hurricane Katrina, as issues are identified.
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IRS increases optional standard mileage rates. The Internal Revenue Service (IRS) has announced an increase in the optional standard mileage rates used by employees, self-employed individuals, and other taxpayers for the last four months of 2005. The rate has been increased to 48.5 cents per mile for all business miles driven between September 1 and December 31, 2005. This represents an increase of eight cents from the 40.5-cent rate in effect for the first eight months of 2005, as provided under Rev. Proc. 2004-64, IRB 2004-49, 898. The increased four-month rate used for computing deductible medical or moving expenses is 22 cents per mile. The 14 cents-per-mile rate used for providing services to charitable organizations is set by statute and did not change. The IRS usually updates the standard mileage rates on an annual basis during the fall season for the following calendar year. The increased standard mileage rates resulted from the recent increases in the cost of gasoline. The IRS will hold off on setting the 2006 rate until closer to January.
IRS clarifies dependent care assistance reporting. The IRS modified the application of the rule prohibiting deferred compensation under a cafeteria plan. That guidance allows an employer to amend a cafeteria plan document to provide a grace period immediately following the end of each plan year during which unused benefits or contributions remaining at the end of the plan year, including contributions for dependent care assistance, may be used to pay or reimburse expenses incurred during the grace period.
Dependent care assistance. Previous IRS guidance also states that in a cash reimbursement arrangement, the amount reported on Form W-2, Wage and Tax Statement, is the total amount of cash reimbursement furnished to the employee during the calendar year. However, if the employer does not know the actual total amount of cash reimbursement at the time the Form W-2 is prepared, the employer may report a reasonable estimate of the total amount on Form W-2. For a salary reduction arrangement under a Code Sec. 125 cafeteria plan, the amount electively contributed by an employee for the year for dependent care assistance (plus any employer matching contributions attributable thereto) will be considered a reasonable estimate. An employer that amends its cafeteria plan to provide a grace period for dependent care assistance may continue to rely on the previous guidance, by reporting in Box 10 of Form W-2 the salary reduction amount elected by the employee for the year for dependent care assistance (plus any employer matching contributions attributable thereto).
Example: An employer amends its calendar year cafeteria plan to permit a grace period for dependent care assistance until March 15 of the subsequent year, that an employee elects salary reduction of $5,000 for dependent care assistance for the 2005 calendar year and elects an additional $5,000 salary reduction for dependent care assistance for the 2006 calendar year, and that the employee has $500 of dependent care contributions remaining unused at the end of the 2005 plan year, which is available to reimburse dependent care expenses incurred during the grace period. For the 2005 calendar year, the employer may report in Box 10 of Form W-2 the $5,000 salary reduction amount elected by the employee for dependent care assistance in 2005. Similarly, for the 2006 calendar year, the employer may report in Box 10 of Form W-2 the $5,000 salary reduction amount elected by the employee for dependent care assistance in 2006.
IRS proposes FICA rules on several types of "service". The IRS has issued proposed regulations on the application of the Federal Insurance Contributions Act (FICA) to payments for certain services. The payments affected are payments for service not in the course of the employer's trade or business, payments for domestic service in a private home of the employer, payments for agricultural labor and payments for service performed as a home worker. The proposed rules reflect legislative changes that have been made in these areas.
Domestic service. Under Code Sec. 3121(a)(7)(B), cash remuneration paid by an employer to an employee for domestic service in the employer's private home is excluded from wages for FICA tax purposes up to a set dollar threshold. The proposed rules would reflect a change in the threshold and the time period used that was enacted under the Social Security Domestic Employment Reform Act of 1994 (SSDERA) (P.L. 103-387). The legislative change provides an exclusion from wages for FICA purposes for cash remuneration paid in a calendar year for domestic service if the amount paid in the year by the employer to that employee for such service is less than the applicable dollar threshold of $1,000, adjusted annually for inflation. With the appropriate adjustments for inflation, the applicable dollar threshold for 2005 is $1,400. The proposed rules would apply to cash remuneration paid on or after January 1, 1994. In addition, any payment of cash remuneration for domestic service in the employer's private home that is more or less than a whole dollar amount may be computed to the nearest dollar. The proposed rules on the computation to the nearest dollar of cash remuneration for domestic service would apply to cash remuneration paid on or after January 1, 1994.
Agricultural labor. Under Code Sec. 3121(a)(8)(B), cash remuneration paid by an employer to an employee in a calendar year for agricultural labor is excluded from wages for FICA tax purposes up to a specified dollar amount. The proposed rules would reflect a change in the test for determining if such cash payments are wages that was enacted under the Omnibus Budget Reconciliation Act of 1987 (OBRA '87) (P.L. 100-203) and the Technical and Miscellaneous Revenue Act of 1988 (TAMRA) (P.L. 100-647). OBRA '87 changed the test to provide that cash remuneration paid in a calendar year to an employee for agricultural labor is excluded from wages for FICA purposes unless the amount paid in the year by the employer to that employee for such labor is $150 or more or the employer's payments for agricultural labor in the year is $2,500 or more. TAMRA made further changes to the test to account for seasonal agricultural workers. Under TAMRA, the test of whether the employer's expenditures for agricultural labor in a year equal or exceed $2,500 has no effect in determining whether remuneration paid to an employee constitutes wages for FICA purposes if the employee is a seasonal worker. A seasonal worker is one who is employed in agriculture as a hand-harvest laborer and is paid on a piece rate basis, who commutes daily from his permanent residence to the farm where he is employed, and who has been employed in agriculture less than 13 weeks during the preceding calendar year. The proposed rules would apply to cash remuneration paid on or after January 1, 1988.
Home workers. Under Code Sec. 3121(a)(10), cash remuneration paid by an employer to an employee who is a home worker is excluded from wages for FICA tax purposes up to a specified dollar amount. The proposed rules would reflect a change in the dollar threshold and the time period used to determine the exclusion that was enacted under the Social Security Amendments of 1977 (SSA '77) (P.L. 95-216). The legislative change provides an exclusion from wages for FICA purposes for cash remuneration paid in a calendar year by an employer to an employee for service as a home worker if the amount paid in the year by the employer to that employee for such service is less than $100. A home worker is an individual who performs work, according to specifications furnished by the person for whom the services are performed, on materials or goods furnished by such person, which are required to be returned to such person or a person designated by him. The proposed rules would apply to cash remuneration paid on or after January 1, 1978.
Service not in course of employer's trade or business. Under Code Sec. 3121(a)(7)(C), cash remuneration paid by an employer to an employee for service not in the course of the employer's trade or business is excluded from wages for FICA tax purposes up to a specified dollar amount. The proposed rules would reflect a change in the dollar threshold and the time period used to determine the exclusion that was enacted under (SSA '77). The legislative change provides an exclusion from wages for FICA purposes for cash remuneration paid in a calendar year by an employer to an employee for service not in the course of the employer's trade or business if the amount paid in the year by the employer to that employee for such service is less than $100. The proposed rules would apply to cash remuneration paid on or after January 1, 1978.
Comment request. The IRS is requesting comments. Written or electronic comments and requests for a public hearing must be received by November 24, 2005. Submissions should be sent to: CC:PA:LPD:PR (REG-104143-05), Room 5203, IRS, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be hand delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to: CC:PA:LPD:PR (REG-104143-05), Courier's Desk, IRS, 1111 Constitution Avenue, NW., Washington, D.C., or sent electronically to www.irs.gov/regs or www.regulations.gov (referencing IRS and REG-104143-05).
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EBSA, IRS extend HIPAA and COBRA time frames. As a result of Hurricane Katrina, a number of participants and beneficiaries covered by group health plans, disability or other welfare plans, and pension plans may encounter problems in exercising their health coverage portability or continuation coverage rights, or in filing or perfecting their benefit claims. Similarly, employers in affected areas may face difficulties in fulfilling their notice obligations to participants and beneficiaries. Recognizing the numerous challenges already facing affected participants and beneficiaries and plan sponsors, the Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS) are taking steps to minimize the possibility of individuals losing benefits because of a failure to comply with certain pre-established time frames.
For participants, beneficiaries, and plans in the disaster areas (the counties and parishes in Louisiana, Mississippi or Alabama that have been or are later designated as disaster areas eligible for Individual Assistance by the Federal Emergency Management Agency because of the devastation caused by Hurricane Katrina), the time frames for the following provisions are tolled for the period between August 29, 2005 and January 3, 2006. The effect is to freeze the application of the time periods through January 3, 2006.
Extended time frames
- The Health Insurance Portability and Accountability Act (HIPAA) provides portability of group health coverage by, among other things, giving people credit for prior health coverage. Under the general HIPAA rules, prior credit may be disregarded if a person goes without coverage for 63 days. Under the Agencies’ relief, this time period has been extended to allow Katrina victims more time to secure health coverage without losing coverage for preexisting health conditions.
- HIPAA also requires special enrollment rights upon certain events, such as loss of other coverage, but only if an individual requests enrollment within 30 days of the loss. Relief has also been provided to allow Katrina victims more time to request enrollment in other group health coverage.
- The Consolidated Omnibus Budget Reconciliation Act (COBRA) permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage. The general COBRA rules allow 60 days to request COBRA coverage. This time frame has also been extended to give Katrina victims more time to request continuation coverage.
- The COBRA rules also govern timing of premium payments. A grace period has been added to give victims more time to make their COBRA payments.
- The benefit claim procedure rules require employee benefit plans to establish and maintain reasonable procedures for the determination and appeal of benefit claims. EBSA is requiring plans to extend time frames for affected individuals to file a benefit claim and to file an appeal.
- Plans must provide certain notices in connection with the HIPAA portability and COBRA continuation provisions within certain time frames. The agencies are extending these time frames for plans that cannot make their disclosures on time due to the hurricane.
Retirement plans permitted to make loans and hardship distributions to Hurricane Katrina victims. A qualified employer plan will not be treated as failing to satisfy any requirement under the IRS Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Katrina, to an employee or former employee whose principal residence on August 29, 2005, was located in one of the counties or parishes in Louisiana, Mississippi or Alabama that have been or are later designated as disaster areas eligible for Individual Assistance by the Federal Emergency Management Agency because of the devastation caused by Hurricane Katrina or whose place of employment was located in one of these counties or parishes on such date or whose lineal ascendant or descendant, dependent or spouse had a principal residence or place of employment in one of these counties or parishes on such date. Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution, unless the plan administrator has actual knowledge to the contrary, and such distribution is treated as a hardship distribution for all purposes under the Code and regulations. For purposes of this announcement, a "qualified employer plan" means a plan or contract meeting the requirements of §401(a), 403(a) or 403(b), and, for purposes of the hardship relief, which could, if it contained enabling language, make hardship distributions. For purposes of this paragraph, a "qualified employer plan" also means a plan described in §457(b) maintained by an eligible employer described in §457(e)(1)(A), and any hardship arising from Hurricane Katrina is treated as an "unforeseeable emergency" for purposes of distributions from such plans. For example, a profit-sharing or stock bonus plan that currently does not provide for hardship or other in-service distributions may nevertheless make Katrina-related hardship distributions pursuant to this announcement, except from QNEC or QMAC accounts or from earnings on elective contributions. A defined benefit or money purchase plan, which generally cannot make in-service hardship distributions, may not make hardship distributions pursuant to this announcement, other than from a separate account, if any, within such plan containing either employee contributions or rollover amounts.
The amount available for hardship distribution is limited to the maximum amount that would be permitted to be available for a hardship distribution under the plan under the Code and regulations. However, the relief provided by this announcement applies to any hardship of the employee, not just the types enumerated in the regulations, and no post-distribution contribution restrictions are required. For example, regulations under §401(k) provide safe harbor hardship distribution standards wherein a hardship is deemed to exist only for certain enumerated events, and after receipt of the hardship amount, the employee is prohibited from making contributions for at least 6 months. Plans need not follow these rules with respect to hardship distributions described in the first two sentences in the immediately preceding paragraph.
If the plan does not provide for loans or hardship distributions, the plan must be amended to provide for loans or such emergency distributions no later than the end of the first plan year beginning after December 31, 2005. To qualify for the relief under this announcement, a hardship distribution must be made on account of a hardship resulting from Hurricane Katrina and be made on or after August 29, 2005, and no later than March 31, 2006. In the case of plan loans made pursuant to this announcement, such loans must satisfy the requirements of §72(p).
In addition, a retirement plan will not be treated as failing to follow procedural requirements for plan distributions (in the case of all retirement plans, including IRAs) or loans (in the case of retirement plans other than IRAs) imposed by the terms of the plan, merely because such requirements are disregarded for any period beginning on or after August 29, 2005, and continuing through March 31, 2006, with respect to distributions to individuals described in the first paragraph under "Relief", provided the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith effort under the circumstances to comply with such requirements. However, as soon as practical, the plan administrator (or financial institution in the case of IRAs) must make a reasonable attempt to assemble any foregone documentation. For example, if spousal consent is required for a plan loan or distribution and the plan terms require production of a death certificate if the employee claims his or her spouse is deceased, the plan will not be disqualified for failure to operate in accordance with its terms if it makes a distribution or loan to an individual described in the first paragraph under "Relief" in the absence of a death certificate if it is reasonable to believe, under the circumstances, that the spouse is deceased, the distribution is made no later than March 31, 2006, and the plan administrator makes reasonable efforts to obtain the death certificate as soon as practical. For purposes of this announcement, "retirement plan" has the same meaning as "eligible retirement plan" under §402(c)(8)(B).
The DOL has advised Treasury and the Internal Revenue Service that it will not treat any person as having violated the provisions of Title I of the Employee Retirement Income Security Act solely because they complied with the provisions of this Announcement.
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IRS updates Katrina tax relief guidelines. The IRS has announced additional details to help ensure that those impacted by Hurricane Katrina get the tax relief to which they are entitled. Notice 2005-73, dated September 21, has the full details regarding the relief. Taxpayers affected by the hurricane may be eligible for tax relief, regardless of where they live. Deadlines for affected taxpayers to file any returns, pay any taxes and perform other time-sensitive acts have been postponed to January 3, 2006. (NOTE: H.R. 3768 proposes to extend the deadline further, to February 28, 2006.)
In the hardest-hit areas--those designated by FEMA as "individual assistance areas"--the tax relief will be automatic, and taxpayers will not need to do anything to get the extensions and other relief available. In areas where FEMA has determined damage is more isolated--designated as "public assistance areas"--or for other taxpayers outside the impacted area, people will need to identify themselves as hurricane victims when filing with the IRS. The IRS also will work with any taxpayer who resides elsewhere but whose books, records or tax professional are located in the areas affected by Hurricane Katrina.
To help identify as many affected taxpayers as possible, the IRS encourages all taxpayers affected by Hurricane Katrina to write "Hurricane Katrina" in red ink at the top of their forms or any other documents filed with the agency. Taxpayers who need to alert the IRS or have other Katrina-related questions can also call the special IRS disaster hotline at 1-866-562-5227.
Interest and penalties waived. The IRS will abate interest and any late filing, late payment or failure to deposit penalties that would otherwise apply. This relief includes the September 15 due date for estimated taxes and for calendar-year corporate returns with automatic extensions; the October 17 deadline for individuals who received a second extension for filing their individual income tax returns; the October 31 deadline for filing quarterly federal employment and excise tax returns; and employment and excise deposits due on or before January 3, 2006. In addition, any disaster-area taxpayer who receives a penalty notice from the IRS should call the number on the notice to receive penalty abatement.
The postponement of deadlines, interest suspension and waiver of penalties apply to any tax return, tax payment or tax deposit with an original or extended due date falling on or after August 29, 2005. In Florida, where Katrina hit first, the date is on or after August 24, 2005.
Where taxpayers live can affect whether they need to identify themselves as Katrina victims when filing with the IRS. For the hardest-hit counties and parishes--those disaster areas designated by FEMA as qualifying for "individual assistance" – taxpayers with addresses in those areas do not need to contact the IRS to get the extensions and other relief available. In areas where damage is less widespread--the FEMA disaster areas qualifying for "public assistance" – taxpayers should identify themselves as hurricane victims when filing forms and responding to IRS notices and contacts to ensure that they receive the relief to which they are entitled.
Areas covered by Katrina tax relief. Areas covered by the Katrina tax relief and whether the relief is automatic or is based on taxpayer's self-identification are:
Louisiana. Taxpayers will receive automatic relief in 31 Louisiana parishes designated for individual assistance: Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Pointe Coupee, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana.
Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 33 Louisiana parishes designated for public assistance: Allen, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne, Concordia, Desoto, East Carroll, Evangeline, Franklin, Grant, Jackson, LaSalle, Lincoln, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, St. Landry, Tensas, Union, Vernon, Webster, West Carroll and Winn.
Mississippi. Taxpayers will receive automatic relief in 47 Mississippi counties designated for individual assistance: Adams, Amite, Attala, Claiborne, Choctow, Clarke, Copiah, Covington, Franklin, Forrest, George, Greene, Hancock, Harrison, Hinds, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston and Yazoo.
Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 35 Mississippi counties designated for public assistance: Alcorn, Benton, Bolivar, Calhoun, Carroll, Chickasaw, Clay, Coahoma, DeSoto, Grenada, Holmes, Humphreys, Issaquena, Itawamba, Lafayette, Leflore, Lee, Marshall, Monroe, Montgomery, Panola, Pontotoc, Prentiss, Quitman, Sharkey, Sunflower, Tallahatchie, Tate, Tippah, Tishomingo, Tunica, Union, Washington, Webster and Yalobusha.
Alabama. Taxpayers will receive automatic relief in 10 Alabama counties designated for individual assistance: Baldwin, Choctaw, Clarke, Greene, Hale, Mobile, Pickens, Sumter, Tuscaloosa and Washington. Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 12 counties eligible for public assistance: Bibb, Colbert, Cullman, Jefferson, Lamar, Lauderdale, Marengo, Marion, Monroe, Perry, Wilcox and Winston.
Florida. Taxpayers will receive tax relief if they identify themselves as being impacted by Hurricane Katrina and they live in these 11 Florida counties designated for public assistance: Monroe, Broward, Miami-Dade, Bay, Collier, Escambia, Franklin, Gulf, Okaloosa, Santa Rosa and Walton.
Others affected by Katrina. The IRS will work with any taxpayer who resides elsewhere but whose books, records or tax professional are located in the areas affected by Hurricane Katrina. These taxpayers will need to identify themselves as hurricane victims when filling out their forms by marking "Hurricane Katrina" in red ink (IR-2005-109, September 21, 2005).
SSA to provide identity letters to Katrina survivors. Commissioner of the Social Security Administration, Jo Ann Barnhart, recently explained on C-Span's Washington Journal how survivors of Hurricane Katrina who were receiving Social Security benefits by check and are now without identification may obtain their benefits. As previously reported, the Commissioner said that beneficiaries without IDs can go to any Social Security office where they will be asked a set of questions to determine their identity. Barnhart referred to this procedure as "expedited protocol." Acknowledging the difficulty of cashing a check without any identification, Barnhart said that once a beneficiary's identity is determined, the individual will be given a letter confirming that identity. According to the Commissioner, the letter will be honored at any bank for check-cashing purposes.
Katrina could delay Bush tax cut, SS reform agenda in Congress. With the response to the devastation caused by Hurricane Katrina its "highest priority," Bush administration officials are acknowledging that the storm could delay congressional action on the president's tax cut agenda. Treasury Secretary John Snow, at a speech before the National Association of Federal Credit Unions on September 20, indicated that tax cuts are no longer on the front burner while Congress and the White House focus on hurricane relief efforts. Asked whether it was accurate to say the president would not be opposed to Congress setting the legislative schedule so that those tax cuts which remain in effect in 2005 are not addressed until 2006, White House Press Secretary Scott McClellan indicated that the administration is flexible. The White House will work with Congress on the "timetable for addressing other priorities," McClellan said, adding that "it is accurate to say that Hurricane Katrina has certainly had an impact on the congressional timetable." The White House spokesman on numerous occasions has pointed out that none of the tax cuts in question expire until the end of 2006.
Bush wants Social Security reform "by adjournment". Separately, following a White House meeting with members of the President's Commission to Strengthen Social Security, former congressman and panel member, Tim Penny, told reporters that Bush wants Congress to act on Social Security reform legislation before adjournment. The president is committed to both long-term funding of the Social Security program and his personal savings accounts proposal, Penny maintained, but he added that administration officials also have advised him that the Growing Real Ownership for Workers (GROW) Act (H.R. 3304) in Congress would be a good first step.
White House Deputy Press Secretary Trent Duffy noted that the GROW account bill "has a personal savings account feature," however, he stressed that the president remains committed to his own proposal. Unlike the White House proposal, GROW accounts would use Social Security funds to create individual accounts for workers under 55, unless they opt out. The accounts are designed to be a transitional method of saving for retirement until Congress enacts a permanent savings option for future retirees. As reported last week, the Congressional Budget Office recently analyzed H.R. 3304 and found that it would delay trust fund insolvency by eleven years, and that it would reduce the 75-year trust fund shortfall from 0.40% to 0.24% as a percentage of gross domestic product (GDP) and from 1.05% to 0.64% as a percentage of taxable payroll. However, the measure would also increase debt held by the public by 20% of GDP by 2063. And, because of the additional interest costs, by 2105, public debt would be 33% of GDP higher than under current law.