NRECA Employee Benefits Weekly

401(k) Plan Can Make Loans, Hardship Distributions to Victims of Hurricane Matthew

Posted on Posted in Retirement Benefits

The Internal Revenue Service (IRS) has issued guidance allowing financial hardship distributions and loans from 401(k) Pension Plan accounts for individuals affected by Hurricane Matthew. 401(k) Plan participants who live in one of the counties identified for individual assistance by the Federal Emergency Management Agency (FEMA) or outside of the disaster area can request a hardship distribution or loan and use it to assist a spouse, son, daughter, parent, grandparent or other dependent  who had a principal residence or place of employment in one of the areas designated by FEMA on October 3, 2016, for Florida and October 4, 2016, for Georgia, North Carolina and South Carolina. The distribution and/or loan can be for any reason related to the storm. For details about which geographic areas qualify for special treatment of hardship distributions and tax relief, visit irs.gov.

The relief rules apply for 401(k) Plan hardship distribution and loan requests that meet the following criteria:

  • Timing: The storm-related hardship must be incurred and the related distribution made between October 3, 2016 (for Florida) and October 4, 2016 (for Georgia, North Carolina and South Carolina) and March 15, 2017.
  • Eligibility: 401(k) Plan participants who are storm victims because their principal residence or place of employment is located in the designated disaster area on October 3, 2016, for Florida or October 4, 2016, for Georgia, North Carolina and South Carolina; and/or participants who live outside of the disaster area can request a hardship distribution and/or loan and use it to assist a spouse, son, daughter, parent, grandparent or other dependent that lived or worked in the disaster area on the specified dates. For a complete list of eligible counties, visit https://www.fema.gov/disasters.

Financial hardship distributions due to Hurricane Matthew

  • Justification: We will rely upon the participant’s statement that they have the need for the hardship distribution and for the amount requested, unless there is contrary information. We may request documentation supporting the distribution request after the fact.
  • Special Processing: To streamline these requests, participants must complete the 401(k) Pension Plan Hurricane Matthew Financial Hardship Distribution Statement in addition to the 401(k) Pension Plan Financial Hardship Distribution Application posted on NRECA’s Employee Benefits website. Both forms should be submitted to the NRECA Retirement Plan Distribution (RPD) Unit per the instructions on the application. Note: Section B of the Hardship Distribution Application does not need to be completed.
  • Administration: Unless the plan document is amended, the plan’s hardship distribution provisions remain unchanged. Due to the special circumstances, the rule requiring a six-month suspension of contributions following the date of a hardship distribution does not apply. Normal contributions to the 401(k) Plan may continue.

Loans Due to Hurricane Matthew

  • Administration: A plan loan made pursuant to this relief must still satisfy legal requirements. Unless the plan document is amended, the plan’s loan provisions remain unchanged. Participants are unable to exceed the maximum number of loans or the maximum loan amount available based on the terms of the plan.

IMPORTANT: In order to allow hardship distributions and/or loans, the plan document must contain language authorizing them. If the cooperative does not currently allow hardship distributions, the adoption agreement may be retroactively amended by December 31, 2017. If the cooperative does not currently allow loans, the adoption agreement must be amended before the loans can be made. The co-op must notify their field representative of their intent to amend the plan document and provide written permission to process hardship distributions prior to the amendment.

Participant resources

If you have any questions, contact your field representative directly or the Member Contact Center by phone at 866.673.2299 or email contactcenter@nreca.coop.

 

 

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