SECURE Act – Special Disaster-Related Rules for Use of Retirement Funds

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) includes special disaster-related rules for the use of retirement funds.

New provisions provide temporary relief to taxpayers whose principal residence lies in an area affected by certain qualified major disasters, as well as to disaster relief workers and certain others impacted by catastrophe. This includes reprieve from the 10% early withdrawal penalty typically assessed when taking a qualified disaster relief distribution. The relief applies to up to $100,000 of distributions from employer-sponsored retirement plans and IRAs, provided the distributions are taken within six months of the passage of the SECURE Act (that is, by June 19, 2020).

Distributions may be subsequently repaid into a qualified plan or IRA, while those distributions not repaid may be taken into income ratably over a three-year period. Individuals may also repay hardship distributions for cancelled first-time home purchases due to a qualified disaster.

The SECURE Act also makes additional plan loan amounts available to participants whose principal residence sustains an economic loss by reason of a covered disaster. Plan loans have typically been limited to no more than $50,000, but the SECURE Act increases this limit to $100,000 for qualifying participants. The Act also extends for one year (or, if later, until June 17, 2020) the due date of any qualified individual’s loan repayment that would otherwise be due during the period beginning on the date of the disaster and ending (180) days after the last day of the disaster.

Lastly, the SECURE Act provides an automatic extension of certain filing deadlines for individuals and employers affected by disasters. The extension applies to filing returns and paying taxes, making contributions to qualified plans and IRAs, withdrawing excess IRA contributions and completing rollovers.

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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 contactSD@schneiderdowns.com.

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.

© 2020 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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