Natural Disaster Resources and Updates

Key information and resources to support plan sponsors in the event of a natural disaster

As a retirement savings plan fiduciary, you are responsible for navigating complex situations requiring timely decisions and ongoing updates to ensure the effective management of the plan. One such challenge can be responding to natural disasters, which may necessitate swift action to protect the plan and its participants.

Fortunately, you have help. Fidelity actively monitors natural disasters impacting our clients and participants, as well as all corresponding government-declared relief measures applicable to each situation. The information below will give you a look at your responsibilities during federally declared natural disasters and how Fidelity can help.

What is a federally declared natural disaster?

When a disaster is deemed to be beyond the response capabilities of the state or local government, the president of the United States can issue a major disaster declaration. This type of declaration is for any natural event, such as a hurricane, tornado, snow or windstorm, earthquake, volcanic eruption, landslide, mudslide, drought, or fire. It opens up additional levels of assistance for survivors and businesses, including the ability to apply for Federal Emergency Management Agency (FEMA) assistance and allowing defined contribution retirement plans to offer special distributions and plan loan relief to participants affected by the disaster.

Understanding retirement plan emergency options

The IRS offers two key options to help plan sponsors support participants during such circumstances. Depending on the situation, retirement plan assistance can be provided through a Qualified Disaster Distribution, or a FEMA hardship. Your plan may utilize one or both of these provisions to address participants’ needs during difficult times. Please contact your Fidelity representative to confirm which the following options your plan offers.

Qualified Disaster Distribution

A qualified disaster distribution refers to a financial need that allows participants in retirement plans like 401(k)s to withdraw funds without the usual early withdrawal penalties—up to $22,000 from all defined contribution plans. This includes a qualified disaster recovery distribution that can be made from an eligible retirement plan on or after the first day of the incident period of a qualified disaster.

FEMA Major Disaster hardship

The declaration of a major disaster can trigger special provisions, distribution rules, and increased access to funds through hardship withdrawals or loans. These hardship options are designed to meet an immediate, significant financial need, such as certain medical expenses, a home purchase, funeral expenses, or expenses and losses incurred on account of a federal disaster declaration. Not all retirement plans provide hardship distributions, and the specific criteria used to determine a qualified hardship may vary depending on your individual plan design. It is important that plan sponsors understand the qualifying circumstances for these hardship withdrawals and ensure their plans comply with IRS guidelines and deadlines while staying informed of declarations to provide timely support and regulatory relief.

Plan sponsors using the Fidelity preapproved plan document that offers all seven of the safe harbor hardship withdrawal reasons do not need to take any action to implement FEMA hardship withdrawals for affected participants.

Plan sponsors of individually designed plan documents should contact their Fidelity representative to determine the required actions to implement FEMA hardship withdrawals if they have not already been implemented.

Plan sponsors of plans that do not offer hardship withdrawals but want to add them should contact their Fidelity representative.

Understanding filing deadlines

It’s critical to stay informed about filing deadlines for important forms like the Form 5500 and Form 8915-F. These filings are integral to meeting compliance obligations and ensuring the continued benefits of your retirement plans. However, natural disasters can create significant operational challenges, making it difficult to meet these deadlines. Fortunately, in such events, the government often provides filing extensions and relief measures to help plan sponsors and fiduciaries maintain compliance while addressing the impact of the disaster on their organizations.

Understanding filing extensions for Form 5500

Form 5500 is a critical annual report required for employee benefit plans to satisfy annual reporting requirements under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. When a natural disaster strikes, the IRS and Department of Labor (DOL) may announce extensions for filing deadlines to help alleviate the pressure on affected employers.

These extensions typically apply to areas that are declared disaster zones by FEMA.).. Affected employers are generally given time to file Form 5500 without penalties. The length of the extension varies based on the severity of the disaster and the government assessment of the region’s ability to recover. Please monitor the IRS and DOL announcements for specific relief measures.

Form 8915-F: Reporting disaster-related distributions

Form 8915-F is used to report qualified disaster distributions and repayments. In the event of a natural disaster, this form becomes crucial for employers who offer retirement plans with provisions allowing participants to take disaster-related distributions. The IRS provides relief to plan sponsors and participants by offering extended deadlines for reporting these distributions, especially if their recordkeeping or administrative functions are impacted by the disaster.

Plan sponsors should work closely with legal and tax professionals, as well as their Fidelity representative, to ensure all extensions and filing requirements are understood and met.

By staying informed and leveraging available government extensions, you can navigate the complexities of natural disasters while maintaining compliance and protecting the integrity of your retirement plan(s).

Providing additional relief resources for employees during national disasters

In the wake of a national disaster, your employees could possibly face immediate financial and personal hardships that go beyond the scope of retirement plan provisions. As an employer, you can play a crucial role in supporting your workforce by sharing information on national relief programs that offer additional resources. As an employer, you can play a crucial role in supporting your workforce by sharing information on national relief programs that offer additional resources.

Encouraging your employees to stay informed and explore relief programs outside of their retirement plans can help alleviate financial stress and provide access to critical services, including:

FEMA assistance: FEMA provides financial aid for temporary housing, emergency home repairs, and other disaster-related expenses.

American Red Cross: Known for offering emergency shelter, food, and essential supplies, the American Red Cross also provides financial assistance and recovery resources in disaster-affected areas.

Fidelity Viewpoints: Help your participants by sharing these financial steps to take–before and after a catastrophe.

Fidelity Charitable^® disaster relief: As disasters become more prevalent, you may be thinking about how you can help. In times of crisis, Fidelity Charitable^® donors play an essential role in relief and recovery.

State and local assistance programs: Many state and local governments offer specialized aid for those affected by natural disasters, including housing assistance, utility relief, and food assistance.

Nonprofit and community organizations: Groups like the Salvation Army, United Way, and local food banks provide essential relief, such as food, shelter, clothing, and financial assistance.

Sharing these resources with your employees not only enhances their overall well-being but also demonstrates your organization’s commitment to their financial and emotional recovery during challenging times. Consider including links to these programs in your employee communications, newsletters, and on your benefits platforms to ensure easy access to critical aid when it’s needed most.