Hurricane Sandy Relief: IRS Guidance
November 16, 2012
On November 16, 2012, the Internal Revenue Service ("IRS") released Announcement 2012-44 allowing participants affected by Hurricane Sandy to take hardship and emergency withdrawals and loans from their employer plans without having to comply with certain verification procedures that may otherwise be required. Announcement 2012-44 applies to loans and/or distributions made on or after Oct. 26, 2012 but no later than Feb. 1, 2013.
Under the announcement, a 457(b) or 401(k) plan will still satisfy applicable requirements of the Internal Revenue Code ("Code") when the plan makes a hardship distribution or emergency withdrawal for a need arising from Hurricane Sandy to employees and certain members of their families who have lived or worked as of Oct. 26, 2012 in one of the counties identified as a disaster area.
The relief allows hardship distributions or emergency withdrawals in plans that do not currently allow such distributions, provided that the plan is subsequently amended by the end of the first plan year beginning after 2012 to permit the hardships distributions or emergency withdrawals.
Plan sponsors and administrators may rely upon the representations from employees as to the need for and amount of hardship or emergency withdrawal distribution, unless the plan sponsor or administrator has actual knowledge to the contrary.
The amount available for hardship distribution is limited to the maximum amount that would be permitted to be available for a hardship distribution from the plan under the Code and regulations. However, the relief provided by the announcement applies to any hardship of the employee, not just the types enumerated in the regulations, and no post-distribution contribution restrictions are required.