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Relief Due to Hurricane Harvey Qualified Employer Retirement Plans

Hurricane Harvey Tax Update

We continue our communications regarding relief available to those impacted by Hurricane Harvey. This week we discuss, in general, relief available specifically to qualified employer retirement plans, specifically loans and hardship distributions, for those qualifying due to Hurricane Harvey.

Acknowledging the far reaching impact caused by Hurricane Harvey to individuals/employees, businesses/employers, service providers as well as beneficiaries, the Internal Revenue Service ("IRS") has provided relief from certain requirements that pertain to loans and hardship distributions under qualified employer retirement plans.  The relief being addressed applies to plan sponsors, employers, employees, and service providers who are located in a county which has been declared a federal disaster area due to Hurricane Harvey. (List of qualifying counties:

Standard Requirements:

  1. The plan document imposes various limitations on the permissibility of a loan or hardship distribution. For example, a hardship distribution is restricted to medical expenses, the purchase of a principal residence, payments necessary to prevent the eviction from a principal residence or the foreclosure of the mortgage on the principal residence, funeral expenses, certain repairs for damages to a principal residence, and certain post-secondary tuition and related educational fees

  2. The plan document must contain specific language authorizing a loan or a hardship distribution

  3. The Internal Revenue Code ("IRC") imposes requirements relating to plan loans and, unless those requirements are satisfied, the loan is deemed to be a distribution

  4. Plan provisions and the IRC establish verification procedures that must be followed before loans or hardship distributions can be made. The IRC contains criteria an employee must meet in order to receive a hardship distribution such as an immediate and heavy financial need

  5. Loans are limited to the lesser of 50% of the vested balance or $50,000

  6. A hardship distribution is limited to the employee’s salary deferrals to the plan. Earnings and employer contributions are NOT available for hardship distributions

  7. The IRC states that certain employer qualified retirement plans are NOT permitted to make in-service distributions, including hardship distributions

  8. A hardship distribution of pre-tax contribution funds is taxable income and is subject to a 10% penalty if made before the taxpayer reaches age 59 ½

Relief to Verification Procedures & Requirements:

In general, a qualified employer retirement plan will not be treated as failing to satisfy any requirement under the IRC or regulations merely because the plan makes a loan or a hardship distribution for a need arising from Hurricane Harvey to an employee or former employee whose principal residence on August 23, 2017, was located in one of the counties declared a federal disaster area or whose place of employment was located in one of the disaster counties or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date.  (IRS Announcement 2017-11) 

So, what does this mean?

  1. A qualified employer retirement plan that does not currently permit loans or hardship distributions, but wishes to due to Harvey, must amend their plan document to provide for loans and/or hardship distributions. Qualified employer retirement plan amendments necessary to take advantage of relief provided by the DOL and/or IRS, must be adopted no later than the end of the 2018 plan year

  2. A qualified employer retirement plan will NOT be treated as failing to follow procedural requirements for plan loans or hardship distributions imposed by the terms of the plan merely because those requirements are disregarded for the period August 23, 2017 through January 31, 2018

  3. Loans or hardship distributions must be made after August 23, 2017 but no later than January 31, 2018 

  4. Hardship distributions and loans are available to relatives, outside the affected area, to use in assisting children, parents, or grandparents whose principal residence or work location is in the affected area

  5. In general, plan administrators may rely solely upon representation from the employee, or former employee, regarding the need for and amount of hardship distribution. Required supporting documentation should be collected “as soon as administratively practicable” after the funds have been distributed

  6. The amount available for a hardship distribution is unchanged, remaining at the maximum amount that would be permitted under the plan, the IRC, or regulations

  7. Hardship distribution qualifications have been relaxed and apply to any hardship of the employee resulting from Hurricane Harvey. For example, temporary housing, food, pet boarding, clothing, etc.

  8. Post-distribution restrictions do NOT apply such as the prohibition on the employee from making contributions for at least six months after receiving the funds

Department of Labor ("DOL") Relief Initiatives Specific to Hurricane Harvey

Just like the IRS, the DOL recognizes that employers impacted by Hurricane Harvey may encounter issues complying with the Employee Retirement Income Security Act ("ERISA"), for qualified employer retirement plans.  Accordingly, the DOL has issued a number of relief initiatives.

Affected employers and service providers acting on behalf of an employer, such as payroll processing services, located in covered disaster areas may not be able to forward participant payments and withholdings to qualified employer retirement plans within the prescribed timeframe. In such instances, the Department will not – solely on the basis of a failure attributable to Hurricane Harvey – seek to enforce the provisions of Title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practical under the circumstances.


  1. The deadline for filing Form 5500, Annual Return/Report of Employee Benefit Plan, due on or after August 23, 2017, but before January 31, 2018, have been postponed to January 31, 2018

  2. Certain Pension Benefit Guarantee Corp ("PBGC") filings and participant notices that were due on or after August 23, 2017 and before January 31, 2018, have been extended to January 31, 2018

  3. The due date for paying PBGC premiums due on or after August 23, 2017 and before January 31, 2018 has been extended to January 31, 2018

  4. Additional rules apply to Defined Benefit plans 

Facts and circumstances are unique to each individual person or business.  If you have questions regarding the available IRS and/or DOL relief applicable to your personal situation please contact one of our LGT professionals:

Mike Radoff 
Phone: 214.461.1472 

Tonia McBride 
Phone: 214.461.1504

Let our tax professionals help provide you relief.



The material contained in this article is current as of the date produced. The information in this article is for discussion purposes only and should not be relied upon without seeking tax advice specific to your personal facts and circumstances. Any tax advice in this communication is not intended or written by Lane Gorman Trubitt, LLC to be used, and cannot be used, by a client or any other person or entity for the purposes of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein.


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