Retirement Plan Disaster Assistance May Be Available for Iowa Flooding

The Federal Emergency Management Agency (FEMA) issued a disaster declaration on August 25, 2023, for Iowa flooding, for the incident period of April 24, 2023 – May 13, 2023.

Hardship Distributions from Employer Plans

Employers with qualified retirement plans may allow participants to take hardship distributions if they have incurred expenses and losses because of a FEMA-declared disaster, and their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check to determine if they are located in a disaster area designated for individual assistance.

Qualified Disaster Recovery Distributions

Penalty-free qualified disaster recovery distributions, of up to $22,000 per FEMA-declared disaster, from a qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan), qualified annuity plan, tax-sheltered annuity contract, governmental 457 deferred compensation plan, Traditional IRA, SEP plan, SIMPLE plan, Roth IRA, or the federal Thrift Savings Plan may be permitted if requirements are met. Individuals may include the amount distributed in their gross income over a three-year period; they may also repay the amount distributed back into the qualified plan or IRA at any time within a three-year period.