On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 (the “Stimulus Act”), which not only grants taxpayers another stimulus payment, but modifies retirement plans, including qualified distributions in the event disaster.

A qualified disaster includes any disaster that occurred between December 28, 2019 and December 27, 2020 that was declared a disaster by the President during the period beginning January 1, 2020 and ending February 25, 2021. In addition, a qualified person is someone: (1) whose principal place of residence is in a “qualified disaster area”; and (2) who suffered economic loss as a result of the qualifying disaster. A qualified disaster area is any area in which a qualified disaster has been declared but does not include an area that is a disaster area only due to the COVID-19 pandemic (since relief was provided under the CARES Act ).

The law provides for relief in the form of qualified distribution in the event of a disaster. By law, a plan sponsor can amend their pension plan to allow a “qualified person” to withdraw from their eligible pension plan account up to $ 100,000, without penalty or withholding. This distribution reflects the distribution of the CARES Act. To constitute a qualifying distribution, the distribution must be made on or before the first day of the incident period of a “qualifying disaster” and before June 25, 2021. The distribution is taxed over a period of 3 years and can be reassessed. contributed over 3 years to an eligible pension plan, with refunds benefiting from a direct rollover treatment.

The law also allows plan sponsors to amend their plans to grant participants the special right to refinance any hardship distribution initially taken to purchase or build a primary residence in a qualifying disaster area if those funds were not used for those purposes. purposes due to an eligible loss. To benefit from this right: (1) the hardship distribution must have been received no more than 180 days before and within 30 days of the qualifying disaster incident; and (2) the reimbursement must be made no later than June 25, 2021 to an eligible pension plan of which the individual is a beneficiary and for which the rollover of contributions for such distributions is authorized.

The law also allows plan sponsors to increase their pension plan loan limits to allow eligible individuals to receive plan loans up to $ 100,000 or 100% of the present value of their vested account balance. , instead of the vested account of $ 50,000 and 50%. balance limits that normally apply by law. In addition, a plan may provide that repayments on a disaster plan loan may be suspended for a period of up to one year or until June 25, 2021, whichever is longer, if the repayment of this loan would normally be due during the period beginning on the first day of the disaster incident period and ending 180 days from the last day of that incident period. The is similar to COVID-related loans authorized under the CARES Act.