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To amend the Internal Revenue Code of 1986 to provide for rules for the use of retirement funds in connection with federally declared disasters.
12/30/2022, 3:04 AM
Summary of Bill HR 6241
The bill allows individuals affected by such disasters to withdraw funds from their retirement accounts without incurring the usual penalties for early withdrawal. This provision is intended to provide financial relief to those who have suffered losses due to natural disasters such as hurricanes, wildfires, or floods.
Additionally, the bill includes provisions for the repayment of these funds over a period of three years, allowing individuals to replenish their retirement savings once they are back on their feet. This repayment plan is designed to help individuals maintain their long-term financial security despite the temporary setback of a disaster. Overall, the Disaster Recovery and Retirement Account Act seeks to provide a safety net for individuals facing financial hardship in the wake of federally declared disasters, allowing them to access their retirement savings without facing steep penalties and providing a pathway to rebuild their financial stability.
Congressional Summary of HR 6241
This bill allows penalty-free distributions from tax-exempt retirement plans for a federally declared disaster (i.e., a qualified disaster recovery distribution). The bill defines qualified disaster recovery distribution as any distribution within a 180 day period after a disaster declaration that is made to an individual whose principal residence is located in a qualified disaster area (an area for which a major disaster has been declared) and who has sustained an economic loss due to the disaster.
The bill sets forth rules for the recontribution of withdrawals from a plan for first-time home purchases or for purchases or construction of a principal residence in a disaster area, and increases the limit on loans from a qualified employer plan that an individual may take in lieu of a distribution.
