In order to the alleviate hardships of individuals affected by Hurricane Sandy, the IRS has announced that it will relax procedural and administrative rules that apply to retirement plan loans. The IRS is providing this relief in addition to the postponement of various tax filing and payment deadlines to FEMA-designated areas such as New Jersey, New York, and Connecticut. <!–more–>
To provide disaster relief, the IRS is minimizing the amount of red tape that eligible retirement plan participants would undergo in order to access their money. The standard six-month ban on 401(k) and 403(b) contributions that would normally affect employees who take hardship loans will no longer apply.
These liberalized procedures will allow Code Sec. 401(k) plan participants, state and local government employees with Code Sec. 457(b) deferred-compensation plans, tax-exempt organizations with Code Sec. 403(b) tax-sheltered annuities and employees of public schools to take hardship loans with less regulation. Under the liberalized procedures, IRA participants, who are usually barred from taking out hardship loans, may be eligible to receive distributions.
Employees and certain members of their families who work or live in a Hurricane Sandy disaster area may be eligible for these hardship loans and retirement distribution relief. In order to quality for this relief, individuals must make hardship withdrawals by February 1, 2013.