IRS Gives Katrina Survivors 401(k) Break

NEW YORK -- The Internal Revenue Service on Thursday eased restrictions for Hurricane Katrina survivors who wish to take loans or make early withdrawals from their 401(k)s and other workplace retirement plans, CNN/Money reported.

The IRS said it will let organizations that offer workers 401(k)s, 403(b)s, or certain 457 deferred-compensation plans relax the rules governing participants' taking loans or making hardship withdrawals from their accounts.

For example, under normal circumstances, in order to make a hardship withdrawal, you must provide documentation proving you have no other financial resources on which to draw and the money must be used to pay for a home, postsecondary tuition, medical expenses or be used to prevent eviction or foreclosure.

The IRS is now allowing qualified retirement plans to ignore those conditions and to relax any documentation requirements.

-- NYSSCPA.org News Staff

Posted on 9/16/05