The IRS released Announcement 2022-161 on September 20, 2022 (available here), providing relief to victims of Hurricane Fiona in any area designated by FEMA. Those individuals and businesses that reside in the Commonwealth of Puerto Rico qualify for tax relief, postponing various tax filing and payment deadlines that occurred starting on September 17, 2022. Those individuals and businesses will now have until February 15, 2023 to file various federal individual and business tax returns and make tax payments that were originally due during that period. The February 15, 2023 extended deadline also applies to quarterly estimated income tax payments otherwise due on January 17, 2023 and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Additionally, the Puerto Rico Treasury Department issued Internal Revenue Circular No. 22-13 (available here) allowing for special disaster distributions from Puerto Rico qualified plans and Puerto Rico… Continue Reading
In 2019, the IRS updated the safe harbor rules for hardship withdrawals from a retirement plan to permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (“FEMA”), provided the participant’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA has issued a series of disaster declarations as a result of recent catastrophes across the country, including Hurricane Ida, the wildfires in California, and the severe storms and flooding in Tennessee. A list of counties designated by FEMA for individual assistance associated with these incidents can be found on FEMA’s website here. These disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or… Continue Reading
Last year, the safe harbor rules for hardship withdrawals were amended to include a new subsection which permits hardship withdrawals for expenses and losses incurred by an employee on account of a disaster declared by the Federal Emergency Management Agency (?Ç£FEMA?Ç¥). Recently, FEMA issued a disaster declaration as a result of Hurricane Sally that impacted portions of Alabama and Florida on September 14, 2020. A list of areas covered by the disaster declaration can be found on FEMA?ÇÖs website. This disaster declaration means that affected participants may be eligible for hardship distributions under their 401(k) plans. Plan sponsors should review their 401(k) plan?ÇÖs hardship distribution provisions to ensure they contain either the updated safe harbor provisions specifically allowing hardship distributions for federally declared disasters or catch-all language allowing distributions on any permissible hardship under the Internal Revenue Code.
The IRS recently published guidance in the form of FAQs related to the implementation of retirement plan relief available under the CARES Act. While the guidance does not resolve all of the open issues, it does provide some helpful clarifications and insight into what we may expect from future guidance. Specifically, the guidance confirms that the CARES Act provisions allowing for coronavirus-related distributions (?Ç£CRDs?Ç¥) and loan relief are permissible, not required. Furthermore, the guidance points out that even if a 401(k) plan decides not to allow CRDs, if an individual meets the requirements to be a ?Ç£qualified individual,?Ç¥ he or she may be able to treat other plan distributions as a CRD for federal tax purposes. Individuals need to consult with their personal tax advisors on these matters. Finally, alluding to what we may expect from future guidance, the CARES Act FAQs referred back to IRS Notice 2005-92 (issued on… Continue Reading
The Bipartisan Budget Act of 2018 (the ?Ç£Budget Act?Ç¥) permits qualified wildfire hardship distributions to be made from October 8, 2017 through December 31, 2018 for qualified individuals impacted by the California wildfires. Plans that elected to provide this relief must be amended no later than the last day of the first plan year beginning on or after January 1, 2019 (i.e., by December 31, 2019 for calendar year plans). In Announcements 2017-11 and 2017-13, the IRS issued relief providing for special hurricane hardship distributions from 401(k) plans for individuals who were directly affected by Hurricane Harvey, Hurricane Irma, or Hurricane Maria. For plans that implemented this relief, the deadline to amend plan documents to incorporate this relief is the last day of the first plan year beginning on or after January 1, 2018 (i.e., by December 31, 2018 for calendar year plans). The Disaster Tax Relief and Airport and… Continue Reading
IRS Provides Retirement Plan Loan and Hardship Distribution Relief for Victims of Hurricane Maria and the California Wildfires
The IRS released Announcement 2017-15 providing relief from some of the loan and hardship distribution requirements for qualified retirement plans (including Code Section 401(a) and 403(b) plans). The relief applies to employees or former employees either (i) whose principal residence was on the island of Puerto Rico or the U.S. Virgin Islands, or in one of the California counties identified by FEMA for individual assistance because of wildfires; or (ii) whose place of employment was in one of those locations. A list of the areas covered by this relief can be found on FEMA?ÇÖs website. Qualified plans that do not have loan or hardship distribution provisions can still make loans or hardship distributions, so long as the plan is amended to provide for them no later than the end of the first plan year beginning after December 31, 2017. View Announcement 2017-15.