SECURE 2.0 Act – Section 331. Disaster Retirement Plan Withdrawal Rule Changes

SECURE 2.0 Act Section 311. Disaster Retirement Plan Withdrawal Rule Changes. 

Historically, Congress has granted temporary relief on a case-by-case basis for retirement plan distributions or loans after a federally declared disaster.

The SECURE 2.0 Act (SECURE 2.0) establishes permanent rules for governing plan distributions and loans in the event of qualified federally declared disasters.

This means Congress no longer needs to pass special relief for each disaster. The following are key elements:

  • Affected individuals may receive up to $22,000 in distributions per disaster,
  • The distribution amount is exempt from the federal 10% early withdrawal fee (any state penalty would still apply),
  • Taxes on withdrawal can be spread over 3-year period,
  • Amounts may be recontributed to a plan or account during the 3-year period beginning on the day after the date of the distribution,
  • Distributions to acquire a principal residence that was located in the disaster area can be recontributed if the funds were not ultimately used to acquire a residence,
  • Increases the maximum loan amount for qualified individuals experiencing a qualified disaster to $100,000 (or 100% of the participant’s vested account balance), and
  • Maximum loan repayment term can by extended by one year.

This relief applies to qualified 401(k), 403(b), and governmental 457(b) plans with respect to any federally declared disaster occurring on or after January 26, 2021.

If you have any questions about SECURE 2.0, please contact a member of the Schneider Downs Retirement Solutions team at [email protected].

This article is part of a series highlighting the impact of the SECURE 2.0 on retirement plan sponsors, participants and retirees. You can view our full catalog of SECURE 2.0 articles here or download our comprehensive SECURE 2.0 eBook here.

About SECURE 2.0

SECURE 2.0 was signed into law by President Biden on Dec. 29, 2022, as part of a $1.7 trillion omnibus spending bill.

This massive piece of legislation builds on the foundation that was laid by the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act to further improve upon the success of the private employer-based retirement system by making it easier for businesses to offer retirement plans and for individuals to save for retirement.

The full text of SECURE 2.0, including provisions that affect pension and cash balance plans, may be found on pages 2,046-2,404 of the omnibus Consolidated Appropriations Act of 2023.

About Schneider Downs Retirement Solutions

Schneider Downs Retirement Solutions has experience in all facets of qualified and non-qualified plan delivery, which allows us to be flexible to the needs and direction of our clients. Our specialized team of advisers and consultants provide objective advice and expertise to help plan sponsors govern their retirement plans appropriately, mitigate risk, improve participant outcomes and support efficient and compliant plan operations. 

Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2024 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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