Hurricane Sandy left a massive path of destruction in her wake and it will take billions of dollars and years of rebuilding before affected communities will return to normal. To assist people who have been financially impacted by the storm, the IRS recently announced it was easing certain restrictions on hardship withdrawals from 401(k), 403(b) and 457 (b) retirement plans.
Here is a quick rundown of how the relaxed restrictions could assist the victims of Hurricane Sandy:
- Retirement plan participants who were affected by the storm can request a hardship withdrawal with little or no documentation required. Typically, a hardship request must be accompanied by proof of a financial hardship caused by a limited number of scenarios such as unreimbursed medical expenses, funeral expenses, or the threat of foreclosure or eviction.
- Hurricane Sandy withdrawals are open to anyone whose lineal or ascendant or descendant lives in the disaster area. In other words, if you weren’t affected yourself but your parents or grandchildren were you will still be eligible for a hardship withdrawal.
- Usually, when a participant takes a hardship withdrawal they are required to suspend new contributions to the plan for six months. For Hurricane Sandy withdrawals that restriction is eliminated.
- Tax liabilities remain in place for Hurricane Sandy hardship withdrawals (this includes the 10 percent penalty tax if you are under age 59 ½).
- To qualify for this relief hardship withdrawal requests must be made by February 1, 2013.
If you believe you qualify for a hardship withdrawal under the relaxed rules you should contact your Human Resources department to file the necessary paperwork.