Many individuals have recently been significantly impacted by both the hurricanes and California wildfires and the Internal Revenue Service (IRS) provided relief for qualified individuals in retirement plans through several announcements. In addition, President Trump signed the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (“Act”), which provides tax relief for individuals affected by Hurricanes Harvey, Irma and Maria (“HIM”). Below is a summary of the recent communications, including new information based on a recent IRS Announcement for Hurricane Maria and the California Wildfires, election forms and other resources to help you take the appropriate next step for your plan.
IRS Retirement Plan Announcements for the Recent Hurricanes and California Wildfires
On Oct. 31, 2017, the IRS issued Announcement 2017-15, Relief for Victims of Hurricane Maria and the California Wildfires, for plan sponsors who want to provide an option for employees to gain access to their retirement assets as a result of the devastation caused by the hurricane. The IRS announced that qualified retirement plans, section 403(b) plans and governmental 457(b) plans can make loans and hardship/unforeseeable emergency distributions to victims of Hurricane Maria and the California Wildfires and members of their families who live or work in the disaster area. These transactions must be made by March 15, 2018. This broad based relief means that a retirement plan can allow a hardship/unforeseeable emergency distribution or loan up to the specified statutory limits for a participant who is a victim of flooding or to assist a son, daughter, parent, grandparent or other dependent that lived or worked in the disaster area for Hurricane Maria on Sept. 16, 2017 for the U.S. Virgin Islands and on Sept. 17, 2017 for Puerto Rico, and the California Wildfires on Oct. 8, 2017. The disaster areas are listed on the FEMA website.
The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. In addition, the six-month suspension of contributions normally in effect for participants after taking a hardship distribution will not apply. Plans which don’t currently offer hardships/unforeseeable emergency distributions and/or loans will be allowed to provide this feature prior to amending their plan. However, the plan document must be amended by the end of the plan year which begins in 2018.
Disaster Tax Relief and Airport and Airway Extension Act of 2017 (“the Act”)
President Trump signed the Act on Sept. 29, 2017, a comprehensive hurricane relief bill to assist U.S. residents affected by recent storms that impacted Texas, Florida, Georgia, Puerto Rico and the U.S. Virgin Islands. The Act does not change nor replace the prior guidance issued by the IRS in their recent announcements that provided relief for the affected participants and certain relatives of affected participants.
Contact your provider for specific election forms.[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]