The IRS today announced that section 401(k) plans and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families.
The IRS release—IR-2017-151 (September 12, 2017)—notes that this relief is similar to that provided last month to taxpayers affected by Hurricane Harvey.
The IRS release explains that the tax treatment of loans and distributions remains unchanged. Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less. Under current law, hardship distributions are generally taxable and subject to a 10% assessment for early withdrawal.
The IRS also today released an advance version of Announcement 2017-13 [PDF 25 KB] to provide relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. In addition, the plan can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement pursuant to Announcement 2017-13.
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