IRS Loosens Hardship, Loan Conditions for Hurricane Harvey Victims
Less than 24 hours after the American Retirement Association requested it, the IRS has granted relief
to taxpayers affected by Hurricane Harvey.
he relief provided in IRS Announcement 2017-11 matches what the American Retirement Association
, parent of the National Association of Plan Advisors, had requested in its Aug. 29 letter
to the IRS: that the IRS allow taxpayers to use their retirement assets in qualified retirement plans to alleviate hardships caused by Hurricane Harvey, in a manner patterned on the relief announced for those affected by Hurricane Sandy in IRS Announcement 2012-44.
In the most recent notice, the IRS says that a qualified employer plan will not be treated as failing to satisfy any requirement under the Internal Revenue Code or regulations just because it makes a loan or hardship distribution for a need arising from Hurricane Harvey, to an employee or former employee:
- whose principal residence on August 23, 2017, was located in one of the Texas counties identified for individual assistance by the Federal Emergency Management Agency because of the devastation caused by Hurricane Harvey; or
- whose place of employment was located in one of these counties on that applicable date; or
- whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date.
This relief will apply to any additional areas in Texas or other states FEMA may identify.
The relief offered at this point by the IRS does not change the amount available for a hardship, nor does it expand the amount available for participant loans. It does permit plans that do not currently offer loan or hardship provisions to nonetheless make those distributions available, as long as the plan is amended to provide for loans or hardship distributions no later than the end of the first plan year beginning after Dec. 31, 2017. To qualify for the relief, a hardship distribution must be made due to a hardship resulting from Hurricane Harvey and be made on or after August 23, 2017, and no later than Jan. 31, 2018. Plan loans made pursuant to this announcement must satisfy the requirements of Code Section 72(p).
In addition, a retirement plan will not be treated as failing to follow procedural requirements for plan loans (in the case of retirement plans other than IRAs) or distributions (in the case of all retirement plans, including IRAs) imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after August 23, 2017, and continuing through Jan. 31, 2018, with respect to loans or distributions to individuals as long as the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith, diligent effort under the circumstances to comply with those requirements. However, as soon as practicable, the plan administrator (or financial institution in the case of IRAs) must make a reasonable attempt to assemble that documentation.
The IRS also has granted another form of relief
the ARA had requested in its letter: an extension for those who had received an extension to file the Form 5500 by Oct. 16. The IRS announced that relief in IR-2017-135.