Hurricane Harvey has caused devastation to hundreds of thousands of residents in Houston, South Texas and the Texas Gulf Coast. Just weeks later, Hurricane Irma impacted Florida and East Coast, and yet another storm, Hurricane Jose threatens more destruction.
Individuals and organizations are working to help recovery in many ways, including making financial donations to charitable organizations. Others decide to provide funds directly to families impacted.
Can employers directly help their own employees impacted by a natural disaster?
Donations to charities make a difference, but many business owners are frustrated that charitable donations don’t go directly to help employees, independent contractors, or local community members.
Employers have options to directly support employees and their local community. The IRS allows employers to assist employees (located in FEMA designated disaster areas) through “qualified disaster relief payments.” These payments can come in various forms, and such payments are not considered taxable income or subject to employment taxes or federal income tax withholding. Further, these payments are not subject to reporting on Form W-2 or Form 1099-Misc.
What options do employers have to set up a a fund to help their employees?
Employers can set up affiliated charitable nonprofit corporate foundations, public charities, or donor advised funds that can assist employees in certain circumstances, and if certain requirements are met. Benefits can be provided based on objective criteria related to an individual’s inability to meet basic living necessities as a result of a natural or civil disaster or an individual’s need for financial assistance arising from an emergency hardship caused by:
- death in the family,
- unusual medical expenses caused by severe illness or accident,
- uninsured losses caused by fire, crime, flood or other disasters,
- unusual expense for the care and training of a handicapped dependent, or
- insupportable indebtedness occurring for reasons beyond the individual’s control.
Cullinane Law Group has helped a number of clients work through these issues to determine what type of employee relief program best fits their company’s and their employees’ needs. If you are interested in establishing a program to provide disaster and/or emergency hardship relief to employees — whether to address current employee needs or to be prepared for the future —contact us to learn more.