Can I take a withdrawal due to a Qualified Federally Declared Disaster (“Qualified Disaster”)?

Signed into law on December 29, 2022, as part of the Consolidated Appropriations Act (CAA), Section 331 of Secure 2.0 provides special provisions for the use of retirement funds in connection with Qualified Disasters occurring on or after January 26, 2021. Rather than requiring new provisions for each federally declared disaster, Section 331 outlines permanent provisions for individuals affected by a Qualified Disaster. *

What are the provisions?

For individuals who qualify, up to $22,000 may be distributed per Qualified Disaster per tax year as a Qualified Disaster Recovery Distribution. This distribution must be requested within 180 days of the Qualified Disaster date. 

These distributions have the following characteristics: 

  • They are exempt from the federal 10% early withdrawal penalty (if applicable) 
  • For tax purposes, income from the distribution may be spread over a three-year period 
  • They may be repaid to a tax-preferred retirement account if repaid within three years of distribution

Who qualifies?

For individuals in an employer sponsored plan, you may qualify for a Qualified Disaster Recovery Distribution if you meet each of the following requirements: 

  • Your employer-sponsored plan has adopted the provision
  • Your primary residence is located in the area affected by the Qualified Disaster
  • You have sustained an economic loss because of the Qualified Disaster

For individuals with an IRA (Individual Retirement Account), you may qualify for a Qualified Disaster Recovery Distribution if you meet each of the following requirements:

  • Your primary residence is located in the area affected by the Qualified Disaster
  • You have sustained an economic loss because of the Qualified Disaster

To request a Qualified Disaster Recovery Distribution, please contact us at 1-888-98-GUIDE (1-888-984-8433) Monday through Friday between 7 a.m. and 6 p.m. CST.

*A Qualified Disaster refers to a major disaster that has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. For more information about current and prior federally declared disasters, visit https://www.fema.gov/.

 

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