David M.Green Bookkeeping and Tax Service
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|Posted on September 13, 2017 at 3:37 PM|
The Internal Revenue Service announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief provided last month to victims of Hurricane Harvey.
Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures.
Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster areas affected by Hurricane Irma and designated for individual assistance by the Federal Emergency Management Agency (FEMA). For a complete list of eligible localities, visit https://www.fema.gov/disasters. To qualify for this relief, hardship withdrawals must be made by Jan. 31, 2018.
The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. As a result, eligible retirement plan participants will be able to access their money more quickly with a minimum of red tape. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.
This broad-based relief means that a retirement plan can allow a victim of Hurricane Irma to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.