PSA - FEMA Disaster Areas

[austin3515]

Shout out to Derrin Watson who on the ERISApedia webcast today provided an important clarification regarding hardship distributions under the FEMA provisions, as described below.  The definition is more specific then I had realized.

 

Abridged version of the reg:

(7) Expenses and losses (including loss of income) incurred by the employee on account of a disaster declared by the Federal Emergency Management Agency (FEMA) …provided that the employee's principal residence was located in an area designated by FEMA for individual assistance with respect to the disaster.

 How do we know if the state was in a FEMA disaster area that was designated for Individual Assistance?

1. Go to this website:

https://www.fema.gov/disasters

2. From the state drop-down, select the State .  Click on the “Apply" button.
3. Click on the link for Covid-19 Pandemic (if there is one!). Make sure you click on the most recent one!
4. Go to the Financial Assistance section.
5. If it says “Individual Assistance” then the employee is eligible for these hardship distributions.  If for example it only says “public assistance” then it does NOT qualify.

 

[Mike Preston]

At this moment when selecting California it shows both Individual and Public Assistance but there is a dollar amount showing up only under Public Assistance.  If the Individual Assistance section only displays what is shown below does that mean no COVID-19 hardships are available?

"Individual Assistance - Dollars Approved

If and when individual assistance money is approved for this disaster, it will be displayed here. Information is updated every 24 hours."

 

[austin3515]

for me this is enough to approve a hardship distribution.  They may not qualify for any dollars from FEMA because of whatever it is that that means, but I'll approve hardships based on that.

[justanotheradmin]

Are you getting hardship requests that wouldn't qualify as a CRD?

I know that a CRD and hardship are different - but some people will fall into both groups. I would think most people would fall into the eligible participant CRD group and then you have a more flexible distribution than a FEMA Hardship. I have a hard time picturing someone qualifying for a FEMA hardship but NOT a CRD. But I suppose it's possible. 

This is all so new. 

[austin3515]

not all clients are adding the CARES Act stuff.

[justanotheradmin]

So the the disaster hardship -

1. does it extend to spouse and dependents? such as loss of income from a spouse that was laid off?

2. Are folks reminding the sponsor that documentation of the loss is required? what are folks suggesting the participant provide? a copy of a lay off notice? Since the hardship distribution can't be more than necessary to satisfy the need. 

[austin3515]

1. (7) Expenses and losses (including loss of income) incurred by the employee 

2. We do that for our clients on the hardships.  We get the documentation from the participants.

[justanotheradmin]

14 minutes ago, austin3515 said:

2. We do that for our clients on the hardships.  We get the documentation from the participants.

What kind of documentation are you finding acceptable? 

[austin3515]

Well in the current situation, lost wages would be easy to verify.  The client can tell us that.  That's plenty of support since they already have all of the records.

[Gilmore]

I finally figured out what Derrin Watson was referencing in the ERISApedia webinar when he was comparing the FEMA page for NJ to the FEMA page for PA.

If you look at the box to the right of the map that shows the counties affected, it lists the type of relief provided.  For NJ, it shows both Individual and Public assistance.  The PA map shows only Public assistance.  He did mention towards the end of the webinar the Individual assistance would in most cases be limited to "Crisis Counseling" and not dollars, which is why the Individual assistance is not showing dollars in the "Financial Assistance" section.

[RatherBeGolfing]

On 4/2/2020 at 6:55 PM, austin3515 said:

not all clients are adding the CARES Act stuff.

Yep, that is what I'm seeing too.  Some are adding both, most are adding one,  some are not adding them at all (at least until absolutely necessary).

As a "wholesome employer" moment, I spoke to a small employer yesterday where the owners are maximizing the CVD loan and distribution to not lay off or furlough the employees.  They hope that between CVD loan/dist and PPP, they can continue to pay employees until business can start bringing money in again.

 

[Gilmore]

I'm just reading through a Q&A from a recent web seminar on the topic in which the presenter has indicated a concern with business owners using CVD loan money to put back into the business as a possible prohibited transaction?  Any thoughts on that one.?  I'm sure RATHER, that your guy isn't the only one doing this.

[Mike Preston]

6 hours ago, Gilmore said:

I'm just reading through a Q&A from a recent web seminar on the topic in which the presenter has indicated a concern with business owners using CVD loan money to put back into the business as a possible prohibited transaction?  Any thoughts on that one.?  I'm sure RATHER, that your guy isn't the only one doing this.

I've heard that concern before with respect to normal borrowing.  Never seen the IRS or DOL assert a PT in the real world.  Whatever probability you assign to the construct being a PT in the absence of CVD's, it is an order of magnitude less in this environment.

[Gilmore]

Thank you Mike.