IRS Eases Plan Loan Rules for Louisiana Flood Victims


The IRS is giving relief to victims of the Louisiana storm and flooding by easing certain rules that apply to retirement plan loans and hardship distributions.

In Announcement 2016-30, released Aug. 30, the IRS said the relief is available for people whose principal residence on Aug. 11, when the storm began, was in one of the affected Louisiana parishes and “who have retirement assets in qualified employer plans that they would like to use to alleviate hardships caused by the Louisiana Storms.”

The IRS storm relief provisions also are available to people living outside of the covered Louisiana area if they need to take out loans or hardship distributions to help a child, parent, grandparent or other dependent living or working in the disaster area. These retirement plan loans or hardship distributions can be taken without worrying about satisfying tax code or regulatory requirements related to the loan or distribution, the IRS announcement said.

The qualified employer plans from which affected individuals are allowed to obtain funds, effective Aug. 11, 2016, to Jan. 17, 2017, include their 401(k), 403(b) and 457(b) governmental plans.

The IRS said that plan administrators can rely on the word of current or former employees about the need for a hardship distribution, as well as the amount needed, unless the administrator has knowledge to the contrary.

The relief absolves qualified employer plans from limitations on permissible loans and distributions from those plans during the specified relief period.

The normal spousal consent rules regarding plan loans apply. Any distribution will be includible in gross income and generally subject to the 10-percent additional tax under Internal Revenue Code § 72(t), except to the extent the distribution consists of already-taxed amounts.

The Labor Department advised Treasury and the IRS that complying with the relief provisions in Announcement 2016-30 won’t violate ERISA.

In an Aug. 15 IRS News Release, Tax Relief for Victims of Severe Storms, Flooding in Louisiana, LA-2016-20, the agency said storm victims will have until Jan. 17,  2017, to file certain individual and business tax returns and make certain tax payments. The IRS further said that all workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also will qualify for relief.

That news listing also includes a listing of the affected Louisiana parishes.

See related story, IRS: Louisiana Flood Victims Can Take Retirement Plan Loans.

Stay on top of the latest industry trends and news coverage with a free trial to the Benefits Practice Resource Center.