Senator Grassley proposes Pension Law changes to help Katrinia relief

[papau]

Introduced in the Senate today 9/12 by Senate Finance Committee Chairman Charles Grassley (R-IA) and others to provide tax relief to affected individuals, with a vote later today expected to pass overwhelmingly, with the House version to be much more narrow and not have pension savings/retirement law relief, followed by conference which will restore the pension law relief. So we can expect substantial relief from the tax penalty provisions for withdrawals from qualified plans (including defined benefit, 401(k) and 403(b) plans) and IRAs, as well as changes to the repayment rules and other loan and harship rules, with Treasury and IRS scheduled to release guidance tomorrow that will significantly relax the hardship rule documentation requirements (as well as other rule changes) for individuals in the hurricane-affected areas.


Grassley-Baucus Announce Hurricane Katrina Tax Relief Package

On September 12, Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) announced a tax relief package for the victims of Hurricane Katrina including several retirement and employer-related relief provisions. If enacted, the Grassley-Baucus package would, among other things, allow:

Penalty-free distributions for Hurricane Katrina victims (eliminates the Internal Revenue Code Section 72(t) 10 percent premature distribution penalty)
Participants to pay the resulting income tax liability over three years
Participants to choose to repay the distributed amount to the qualified plan within three years and get “60-day” rollover treatment
Distributions for home purchases that were not finalized because of Hurricane Katrina to be re-contributed to the plan
Increases in loan limitations for affected participants to the lesser of $100,000 or 100 percent of the participant’s account balance
Deferral of loan payments due after August 29, 2005 and before August 30, 2006 and extension of the maximum repayment period of affected loans for 12 months