The IRS has finalized regulations addressing the federally declared disaster provisions of Section 7508A(d) of the Internal Revenue Code (Code) (86 Fed. Reg. 31151 (June 11, 2021); 26 U.S.C. § 7508A(d)). The final regulations, which adopt the proposed regulations without substantive changes, clarify:

As background, the Code permits Treasury to postpone certain tax-related deadlines, including those relating to employee benefit plans, after a federally declared disaster or terrorist or military action (26 U.S.C. § 7508A). A set-aside period of up to one year is permitted for benefit plans (26 U.S.C. § 7508A(b)).

Subsection (d) was added to Code Section 7508A by 2019 year-end government funding legislation that also included the SECURE Act (Pub. L. No. 116-94 (Dec. 20, 2019)). Subsection (d) requires Treasury to automatically postpone federal tax deadlines for 60 days for federally declared disasters occurring on or after December 21, 2019. In addition, Subsection (d) applies to the deadlines for making contributions to a qualified retirement plan, plan distributions, recharacterizing plan contributions, and plan rollovers.

In January 2021, Treasury issued proposed regulations addressing how Treasury would administer the new mandatory 60-day postponement provision under Subsection (d) alongside a pre-existing rule under Code Section 7508A(a) ("Subsection (a)") that gives Treasury discretionary authority to postpone deadlines in response to federally declared disasters (86 Fed. Reg. 2607 (Jan. 13, 2021); see Legal Update, IRS Proposed Rules Address Automatic Postponement of Tax Deadlines During Federally Declared Disasters). This includes certain actions related to employee benefit plans, listed by cross-reference to Revenue Procedure 2018-58. Subsection (d) provides certain taxpayers a mandatory 60-day postponement period of time that is disregarded for compliance purposes in the same manner as the period specified under a discretionary Subsection (a) postponement period. Treasury received five comments on the proposed regulations.

The final regulations adopt the proposed regulations without substantive changes but modify one of the examples regarding how to calculate the 60-day postponement period.

The final regulations address two problems that Treasury encountered in administering the mandatory 60-day postponement period under Subsection (d). First, it was not clear to Treasury from the text of Subsection (d) which time-sensitive acts are to be postponed following a disaster. Second, it was unclear how the mandatory 60-day period is calculated if a disaster declaration does not include an initial "incident date."

To address these concerns, the final regulations:

If a federal disaster declaration does not specify an incident date, there is no 60-day mandatory postponement period under Subsection (d).

In addition, if a postponement period is less than 60 days, then:

Addressing differences in terminology between the Code and the Stafford Act (under which federal disasters are declared), the final regulations amend a regulation defining "federally declared disaster" to clarify that the term includes major disasters and emergencies—both as declared under the Stafford Act (26 C.F.R. § 1.165-11(b)(1); see Practice Note, COVID-19 Compliance for Health and Welfare Plans: National Emergency Declaration Due to COVID-19).

In a change from the proposed regulations, Treasury modified Example 3 to better illustrate how the 60-day mandatory postponement period is calculated in a situation involving a continuing disaster and multiple emergency or disaster declarations.

In addition to numerous retirement plan-related provisions (such as the deadline for making a rollover or contribution to a retirement plan), Subsection (d) and the final regulations may apply to certain health and welfare plan-related deadlines as well—for example, involving cafeteria plans and health savings accounts. Under the final regulations, the mandatory 60-day postponement period cannot be calculated to be more than one year.