Mary Beth’s Corner

Hurricane Helene Retirement Plan Disaster Assistance Announced for North Carolina

To support recovery efforts, the federal government has rolled out tax relief measures for the entire state of North Carolina.

Read along to find out how this relief may affect you, your business owner clients and their participants. 

Relief Available To all Taxpayers in Affected Disaster Areas:

  • Extended Filing Deadlines
    • The IRS has extended tax return filing and payment deadlines for those in the disaster area until May 1, 2025. This applies to individuals and businesses with returns due in March and April 2025, as well as certain extensions for 2023 returns including Form 5500 Filings.

Visit the IRS website to see disaster relief listed by state.

Relief That May Vary By Qualified Retirement Plan Provisions:

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). See below for which provisions to look for within your plan document as well as a breakdown of what these provisions mean.

  • Hardship Distributions

If you live or work in a designated area and have incurred expenses and losses because of a FEMA-declared disaster you may be eligible for individual disaster assistance through a hardship withdrawal from your retirement account. Verify your eligibility at fema.gov/locations. 

  • Qualified Disaster Recovery Distributions

If you live in a disaster area and have suffered financial losses, you might be able to take out up to $22,000 from certain retirement accounts without facing a penalty. Here’s what you need to know:

Eligible Accounts:
      • You can withdraw from various plans including a qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan), qualified annuity plan, tax-sheltered annuity contract, governmental 457 deferred compensation plan, Traditional IRA, SEP plan, SIMPLE plan, Roth IRA, or the federal Thrift Savings Plan if requirements are met. 

Repayment Option:
      • You can choose to pay back the amount you withdrew within three years.

Tax Treatment:
      • The money you take out can be reported as income over three years, spreading out the tax impact.
  • Recontribution of Home Purchase Distributions

If you took money out of your 401(k), 403(b), or IRA for a home purchase or construction, you may be able to put that money back into a retirement account if certain conditions are met:

Timing:
      • The distribution must have occurred between 180 days before the start of the incident period and 30 days after the end of that period.

      • You must recontribute the money between the start of the incident period and 180 days after either the start of the incident period or the declaration date.

Purpose:
      • The funds must have been intended for buying or building a primary residence but were not used due to the disaster.

Where to recontribute:
      • You can put the money back into various retirement plans, including 401(k) plans, IRAs, and other qualified pension plans.

  • Employer Plan Loan Relief

If your employer’s retirement plan allows loans, you might be able to borrow money under certain conditions:

Loan Amount:
      • You can borrow up to $100,000 or your vested account balance, whichever is smaller.
Loan Repayment Delay:
      • You can postpone your loan repayments for up to one year.
Timing for Increased Limits:
      • These higher loan limits apply from the start of the incident period or the declaration date (whichever is later) and last for 180 days after the incident period begins.
Repayment Delays:
      • If you have an outstanding loan and your payment is due between the start of the incident period and 180 days after the incident ends, you can delay repayment.
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Additional Guidance

Review the IRS’s disaster relief FAQs and Form 8915-F for more details on Qualified Disaster Retirement Plan Distributions. Consult a tax advisor to understand how these options can benefit or vary by your situation.

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