IRS eases retirement loan procedures for Sandy victims

Allows administrators of 401(k) and other qualified plans to provide distributions even if plan documents don't include loan provisions

Nov 19, 2012 @ 3:15 pm

By Liz Skinner

IRS, 401(k), taxes, 403(b)
+ Zoom

People affected by Hurricane Sandy, or their close relatives, can tap qualified retirement plans without having to follow certain procedures for hardship withdrawals, the Internal Revenue Service said. Taxability rules will still apply.

The government announcement Friday allows administrators of 401(k) and other qualified plans to provide distributions even if plan documents don't include loan provisions, said IRS spokesman Eric Smith.

“The relief is designed to streamline the process by which plans can make distributions and still be qualified retirement plans, and to make it easier for people to get their money,” Mr. Smith said.

Like all hardship withdrawals, these are taxable and subject to a 10% early-withdrawal penalty.

The maximum distribution allowed is equal to the total available for a hardship distribution under the plan documents; the loans must occur by Feb. 1.

The qualified plans include 401(k)s, 403(b)s that public education and nonprofits offer workers, and 457(d) plans that government and certain nongovernment organizations qualify for through their employers.

The relief is aimed at anyone with a primary residence or place of employment in a covered disaster area. A relative of such a person affected by the storm that hit the New Jersey shoreline on Oct. 29 could withdraw from his or her retirement plan to help a spouse, parent, grandparent, child or other dependent who has been affected.

Individual retirement account holders can't take out loans, but their financial institutions may make IRA distributions under the relief, according to the IRS announcement, found here.

0
Comments

What do you think?

View comments

Recommended for you

Latest news & opinion

DOL fiduciary rule opponents want to push implementation back until 2019

ICI, Chamber of Commerce among groups asking for delay, while Democratic lawmakers call on DOL to keep to its earlier planned schedule of Jan. 1, 2018.

Take 5: Vanguard's new CIO Greg Davis talks bonds, stocks and costs

Having just stepped into the role, this veteran of the firm now oversees $3.8 trillion in assets in more than 300 mutual funds and exchange-traded funds.

Tech companies deploy behavioral finance tools for advisers

They seek to turn knowing more about clients into growing more revenue.

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print