Get more! Sign up for PLANSPONSOR newsletters.
Compliance September 24, 2004
Bills May Allow Early Hurricane Victim Tax-Free Retirement Withdrawals
September 24, 2004 (PLANSPONSOR.com) - Bills working
their way through Congress may allow residents of
disaster-prone Florida and surrounding states to make early
tax-free withdrawals of their retirement investment to pay
for their damageed property.
Reported by Kip McDaniel
>In response to the recent damages from the unusually harsh hurricane season, Florida Democratic Senators Bob Graham and Bill Nelson introduced a bill Thursday to allow residents of federal disaster areas to withdraw money from their IRA’s or 401(k) accounts without paying any tax penalty for the purpose of repairing damaged property, according to the Palm Beach Post.
>A similar bill was introduced in the House last week by US Representative Mark Foley (R- Florida) to allow for tax-free withdrawals from IRA’s. It was expected to be placed on the ‘suspension calendar’ – usually reserved for non-controversial bills that will require two-thirds vote for approval – next week.
>The bills have several differences that would have to be ironed out in a conference committee before they become law, however. Key differences include:
- The Senate bill is more encompassing, including IRA’s and 401(k)’s, while the House bill only includes IRA’s.
- The House bill would only include federal disaster areas declared in 2004, where the Senate bill would include those from 2003.
- The Senate bill would allow replacement of the funds within five years without penalty; the House bill does not cover reinvestment.
>Currently, withdrawals from IRA’s are subject to a 10% tax penalty if withdrawn before the age of 59 ½, unless the money is being used for a first-time home purchase or certain educational and health-related costs. 401(k) early withdrawals are subject to similar penalties.