IRS Extends Plan Loan, Hardship Distribution Relief to Irma Victims

Similar to the relief it provided last month to victims of Hurricane Harvey, the IRS announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families.

In Announcement 2017-13, the IRS explains that participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of streamlined loan procedures and liberalized hardship distribution rules.

While usually barred from taking out loans, the IRS further notes that IRA participants may also be eligible to receive distributions under liberalized procedures.

Retirement plans may provide this relief to employees and certain members of their families who live or work in disaster areas affected by Hurricane Irma and designated for individual assistance by FEMA.

For a complete list of eligible localities, visit To qualify for this relief, hardship withdrawals must be made by Jan. 31, 2018.

The IRS explains that the procedural and administrative rules normally applicable to plan loans and hardship distributions are relaxed under the announcement, allowing eligible retirement plan participants to access their money more quickly. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

Under the relief, a retirement plan can allow a victim of Hurricane Irma to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. In addition, a person living outside the disaster area can take out a retirement plan loan or hardship distribution to assist a family member or other dependent who lived or worked in the disaster area.

Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features, the IRS said. In addition, the plan can ignore the reasons that normally apply to hardship distributions. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement as explained in the announcement.

The IRS emphasized that the tax treatment of loans and distributions remains unchanged. Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less.  Under current law, hardship distributions are generally taxable and subject to a 10% early withdrawal tax. Reports suggest that Congress may seek to address the tax treatment for the hurricane victims.

More information about other tax relief related to Hurricane Irma can be found on the IRS disaster relief page. For information on government-wide relief efforts, visit

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