Sec. 502.Special Disaster-Related Rules for Use of Retirement Funds
Posted by Kim Chen on October 22nd, 2017
a)Tax-Favored withdrawals from retirement plans.—
(1)In general.—
Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified hurricane distribution.
(2)Aggregate dollar limitation.—
(A)In general.—
For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified hurricane distributions for any taxable year shall not exceed the excess (if any) of—
(i)$100,000, over
(ii)the aggregate amounts treated as qualified hurricane distributions received by such individual for all prior taxable years.
(B)Treatment of plan distributions.—
If a distribution to an individual would (without regard to subparagraph (A)) be a qualified hurricane distribution, a plan shall not be treated as violating any requirement of the Internal Revenue Code of 1986 merely because the plan treats such distribution as a qualified hurricane distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.
(C)Controlled group.—
For purposes of subparagraph (B), the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986.
(3)Amount distributed may be repaid.—
(A)In general.—
Any individual who receives a qualified hurricane distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986, as the case may be.
(B)Treatment of repayments of distributions from eligible retirement plans other than IRAs.—
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified hurricane distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(C)Treatment of repayments for distributions from IRAs.—
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane distribution from an individual retirement plan (as defined by section 7701(a)(37) of such Code), then, to the extent of the amount of the contribution, the qualified hurricane distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(4)Definitions.—
For purposes of this subsection—
(A)Qualified hurricane distribution.—
Except as provided in paragraph (2), the term “qualified hurricane distribution” means—
(i)any distribution from an eligible retirement plan made on or after August 23, 2017, and before January 1, 2019, to an individual whose principal place of abode on August 23, 2017, is located in the Hurricane Harvey disaster area and who has sustained an economic loss by reason of Hurricane Harvey,
(ii)any distribution (which is not described in clause (i)) from an eligible retirement plan made on or after September 4, 2017, and before January 1, 2019, to an individual whose principal place of abode on September 4, 2017, is located in the Hurricane Irma disaster area and who has sustained an economic loss by reason of Hurricane Irma, and
(iii)any distribution (which is not described in clause (i) or (ii)) from an eligible retirement plan made on or after September 16, 2017, and before January 1, 2019, to an individual whose principal place of abode on September 16, 2017, is located in the Hurricane Maria disaster area and who has sustained an economic loss by reason of Hurricane Maria.
(B)Eligible retirement plan.—
The term “eligible retirement plan” shall have the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(5)Income inclusion spread over 3-year period.—
(A)In general.—
In the case of any qualified hurricane distribution, unless the taxpayer elects not to have this paragraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year.
(B)Special rule.—
For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(6)Special rules.—
(A)Exemption of distributions from trustee to trustee transfer and withholding rules.—
For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified hurricane distributions shall not be treated as eligible rollover distributions.
(B)Qualified hurricane distributions treated as meeting plan distribution requirements.—
For purposes the Internal Revenue Code of 1986, a qualified hurricane distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of such Code.
(b)Recontributions of withdrawals for home purchases.—
(1)Recontributions.—
(A)In general.—
Any individual who received a qualified distribution may, during the period beginning on August 23, 2017, and ending on February 28, 2018, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), of such Code, as the case may be.
(B)Treatment of repayments.—
Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection.
(2)Qualified distribution.—
For purposes of this subsection, the term “qualified distribution” means any distribution—
(A)described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986,
(B)received after February 28, 2017, and before September 21, 2017, and
(C)which was to be used to purchase or construct a principal residence in the Hurricane Harvey disaster area, the Hurricane Irma disaster area, or the Hurricane Maria disaster area, but which was not so purchased or constructed on account of Hurricane Harvey, Hurricane Irma, or Hurricane Maria.
(c)Loans from qualified plans.—
(1)Increase in limit on loans not treated as distributions.—
In the case of any loan from a qualified employer plan (as defined under section 72(p)(4) of the Internal Revenue Code of 1986) to a qualified individual made during the period beginning on the date of the enactment of this Act and ending on December 31, 2018—
(A)clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting “$100,000” for “$50,000”, and
(B)clause (ii) of such section shall be applied by substituting “the present value of the nonforfeitable accrued benefit of the employee under the plan” for “one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan”.
(2)Delay of repayment.—
In the case of a qualified individual with an outstanding loan on or after the qualified beginning date from a qualified employer plan (as defined in section 72(p)(4) of the Internal Revenue Code of 1986)—
(A)if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the qualified beginning date and ending on December 31, 2018, such due date shall be delayed for 1 year,
(B)any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under paragraph (1) and any interest accruing during such delay, and
(C)in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2) of such Code, the period described in subparagraph (A) shall be disregarded.
(3)Qualified individual.—
For purposes of this subsection—
(A)In general.—
The term “qualified individual” means any qualified Hurricane Harvey individual, any qualified Hurricane Irma individual, and any qualified Hurricane Maria individual.
(B)Qualified Hurricane Harvey individual.—
The term “qualified Hurricane Harvey individual” means an individual whose principal place of abode on August 23, 2017, is located in the Hurricane Harvey disaster area and who has sustained an economic loss by reason of Hurricane Harvey.
(C)Qualified Hurricane Irma individual.—
The term “qualified Hurricane Irma individual” means an individual (other than a qualified Hurricane Harvey individual) whose principal place of abode on September 4, 2017, is located in the Hurricane Irma disaster area and who has sustained an economic loss by reason of Hurricane Irma.
(D)Qualified Hurricane Maria individual.—
The term “qualified Hurricane Maria individual” means an individual (other than a qualified Hurricane Harvey individual or a qualified Hurricane Irma individual) whose principal place of abode on September 16, 2017, is located in the Hurricane Maria disaster area and who has sustained an economic loss by reason of Hurricane Maria.
(4)Qualified beginning date.—
For purposes of this subsection, the qualified beginning date is—
(A)in the case of any qualified Hurricane Harvey individual, August 23, 2017,
(B)in the case of any qualified Hurricane Irma individual, September 4, 2017, and
(C)in the case of any qualified Hurricane Maria individual, September 16, 2017.
(d)Provisions relating to plan amendments.—
(1)In general.—
If this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i).
(2)Amendments to which subsection applies.—
(A)In general.—
This subsection shall apply to any amendment to any plan or annuity contract which is made—
(i)pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any provision of this section, and
(ii)on or before the last day of the first plan year beginning on or after January 1, 2019, or such later date as the Secretary may prescribe.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii).
(B)Conditions.—
This subsection shall not apply to any amendment unless—
(i)during the period—
(I)beginning on the date that this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and
(II)ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect, and
(ii)such plan or contract amendment applies retroactively for such period
