Unfortunately, disaster scenarios have become all too common and can cause significant disruption for employers, employees and their affected family members. In the wake of Hurricanes Harvey, Irma, and Maria, Paul Hamburger, co-chair of Proskauer’s Employee Benefits & Executive Compensation Group, explores the unique issues that employers must consider when preparing their employee benefits disaster relief programs.
Welcome to the Proskauer Brief: Hot Topics in Labor and Employment Law. My name is Paul Hamburger and I will be speaking today in a two part podcast on employee benefit plan related issues in the context of disaster recovery situations.
Unfortunately, disaster scenarios have become all too common lately. With the memories of Hurricanes Katrina, Rita, Wilma, Sandy and Andrew in our minds, we’re now faced most recently with Hurricanes Harvey and Irma. All of these scenarios cause havoc for employers, employees and of course all of their family members. In considering relief, employers need to bear in mind that all other issues need to be explored as well. So when a disaster happens it can impact leave policies, workplace safety issues, FMLA related issues, unemployment compensation issues, tax issues and a myriad of other employment related matters. All of these issues are important and need to be considered.
Employee benefits are just one part of a much bigger puzzle. By considering all of these issues an employer will be able to make appropriate decisions that fit within the greater picture of the disaster relief program. In fashioning the various components of an employee benefits disaster relief program, employers should also refer to the IRS website, the Department of Labor website and the website for the pension benefit guarantee corporation. All of these websites have resources available online and they’re all easily findable by searching for disaster relief and the appropriate government agency in any search engine.
In structuring relief, from an employee benefits perspective, it’s important to consider that relief from two different perspectives. On the one hand, you need to look at it from the employer or plan perspective and on the other hand you need to look at it from the perspective of employees as well as participants and beneficiaries.
In structuring that relief for employers as well as employees or participants and beneficiaries, you need to also consider that some of these groups may have been directly impacted and others indirectly impacted. Here’s what I mean by that. Obviously, if an employer’s business is located in the middle of a disaster area, and that business has been destroyed or otherwise impacted, say flooded, there has been a direct impact on that employer.
On the other hand, an employer might not be located in a disaster zone. However, the employer’s vendors such as third party administrators, accounting firms, or other trustees or other service providers might be impacted in the disaster area. That impact may mean that data and other information necessary in order to manage an employee benefit plan is not available to the employer that is not located in the disaster area. I refer to that as an indirect impact on the employer and the employee benefit plans.
Similarly, when you look at employees who have been impacted, some employees have been impacted by living directly in the disaster area. They clearly need relief. In other situations, the employees might not be located in the disaster area. However, their immediate family members such as parents or children may be located in the disaster area. Alternatively, some employees who were not located in the disaster area, they might want to help their coworkers by donating leave or making available other financial resources and these types of programs can be created in a way that does not cause adverse tax consequences for the employees choosing to donate that leave or provide that financial assistance.
Please note here, though, that not all disaster scenarios have been permitted to take advantage of all of these leave sharing opportunities. For example, the leave sharing opportunities were available for Hurricane Sandy, Hurricane Katrina, and 9/11 scenarios. However, not all hurricanes have been treated similarly.
In this case, exceptions for leave sharing programs have been allowed for Hurricane Harvey and will likely be allowed for Hurricane Irma and you should check the IRS website for disaster relief to make sure that leave sharing programs can be available on a tax favored basis.
In part two of this podcast, we will explore in more detail the specific types of relief available, both to employers on the one hand employees, participants and beneficiaries on the other hand. Thank you for joining us on this Proskauer Brief today. Please stay tuned for more insights on the latest hot topics on Labor Employment Law and if you need any further assistance in structuring or designing any disaster relief programs from the perspective of employee benefits or Labor and Employment Law, please contact us through our website at your earliest convenience.