NRECA Employee Benefits Weekly

Relief for Victims of Louisiana Storms Affecting 401(k) Pension Plan Participants

Posted on Posted in Retirement Benefits

IRS guidance has been issued providing relief for financial hardship distributions and loans from 401(k) Pension Plan (401(k) Plan) accounts affected by the Louisiana storms that began in August 2016. Participants who live inside or outside of the disaster area caused by the Louisiana storms can request a hardship withdrawal or loan and use it to assist a lineal ascendant or descendant, dependent, or spouse who had a principal residence or place of employment in one of these parishes on August 11, 2016. The distribution and/or loan can be for any reason related to the storms. For details about which parishes qualify for special treatment of hardship distributions and tax relief, please visit irs.gov.

The relief rules apply for hardship distribution and loan requests that meet the following criteria:

  • Timing: The storm-related hardship must be incurred and the related distribution made between August 11, 2016 and January 17, 2017.
  • Eligibility: 401(k) Plan participants who are flood victims because their principal residence or place of employment is located in the designated disaster area on August 11, 2016; and/or participants who live outside of the disaster area can request a hardship distribution and use it to assist a spouse, son, daughter, parent, grandparent or other dependent that lived or worked in the disaster area on August 11, 2016;

Financial Hardship Distributions Due to Louisiana Storms

  • 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 a Louisiana Storm Financial Hardship Distribution Statement in addition to the standard 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. Please note: Section B of the Financial Hardship Distribution Application does not need to be completed.
  • Administration: Unless the plan document is amended, the plan’s hardship withdrawal provisions remain unchanged. Due to the special circumstances, the rule requiring a 6-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 Louisiana Storms

  • 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 withdrawals and/or loans, the plan document must contain language authorizing them. If your co-op’s 401(k) Plan does not currently allow hardship withdrawals and/or loans, the plan document may be retroactively amended by December 31, 2017. The co-op must notify their field representative of their intent to amend the plan document and provide written permission to process hardship withdrawals and/or loans 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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