The 10% penalty on early withdrawals from retirement plans for individuals who have a principal residence in the disaster relief area and suffered economic loss would be waived. The aggregate amount of distributions received by any individual is limited to $100,000, less prior withdrawals for disaster relief. Individuals would be permitted three years to repay the distribution, and those who do not restore that distribution would be permitted to pay the resulting tax burden ratably over three years.
Individuals who took a hardship distribution from a plan or withdrawal from an IRA for a first-time home purchase in the disaster area and whose transaction was terminated due to the hurricane would be permitted to recontribute the amount withdrawn to a plan or IRA without penalties.
Retirement plan loan limits would be increased to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan (basically doubling current loan limits). If the participant had another plan loan in the last 12 month period, the $100,000 maximum will be limited by the outstanding loan balance in the preceding 12-month period.
Retirement plan loan repayment periods would be extended to purchase or repair homes damaged in the hurricane relief area.
Individuals unable to repay loans could pay the income tax associated with a loan default over three years rather than the full amount in the year of default.
Individuals who previously borrowed from their plan and have a repayment due during the months following the hurricane could delay their loan repayment up to one year.