Some good news in the wake of Hurricane Matthew: participants in 401(k) and similar employer-sponsored retirement plans who have been adversely affected by Hurricane Matthew may be eligible to use their retirement savings to alleviate a hardship caused by the storm.
Last week the IRS announced much needed relief from ordinary retirement plan distribution and loan rules enabling participants to take a hardship distribution or borrow money from their account for a need caused by Hurricane Matthew. Under the announcement, the plan administrator may also ease documentation requirements that would normally apply to distributions and loans, allowing participants to access their money more quickly and easily.
This relief is available for hardship distributions and loans made during the period of October 4, 2016 (October 3, 2016, for Florida) through March 15, 2017. To be eligible, the participant or the participant’s spouse, child, parent or grandparent must have lived or worked in a county designated for individual assistance by FEMA because of the devastation caused by Hurricane Matthew. The FEMA designated counties currently include over a fourth of the counties in North Carolina, half of South Carolina and several counties in Georgia and Florida. A complete list is available on FEMA's website.
Importantly, plans that do not currently allow hardship distributions or loans may make distributions and loans pursuant to this relief as long as the plan is formally amended to provide for those features by December 31, 2016.