The IRS has announced that taxpayers living in an area affected by Hurricane Sandy are able to take a distribution or loan from their 401(a), 403(a), 403(b) or 457(b) without being treated as failing to satisfy the requirements of the plan.
Your retirement account needs to have specific wording in the plan that states loans and distributions are allowable in cases of “unforeseeable emergencies”. If the need for the loan or distribution came directly from the effects of Hurricane Sandy, this is considered a hardship of this category.
The relief provision can be applied in all of the following situations:
- Your primary residence as of October 26, 2012, was located in one of the covered disaster areas
- As of October 26, 2012, your place of employment was located in one of the covered disaster areas
- The primary residence or employer of your lineal ascendant or descendant, dependent, or spouse was located in a covered disaster area on October 26, 2012
- And the loan or distribution must be taken between October 26, 2012 and February 1, 2013
The amount you are able to distribute or borrow is limited to the amount it would be in a normal hardship. To find out more about taking a hardship loan or distribution from your retirement account, contact your accountant today.