Federally Declared Disasters: Retirement Plan Considerations

An employer-sponsored defined contribution retirement plan can provide additional relief to “qualified individuals” impacted by a qualified disaster (a federally declared disaster issued by the president of the United States). A “qualified individual” is an individual whose principal residence during the incident period of any qualified disaster is in the qualified disaster area and the individual has sustained an economic loss by reason of that qualified disaster.  

Employer-provided retirement plans can provide the following options: 

• Distributions of up to $22,000 per federally declared disaster, with no early withdrawal penalty. Such distributions must be taken within 180 days of the date the disaster was declared. 

• Increased maximum loan amounts equal to 100% of a participant’s account balance, up to $100,000. 

• Extended repayment period of one year for current outstanding loans (as of the date such natural disaster was declared). In this case, employers can extend repayment of loans to January 8, 2026. 

Important note: Employers must amend their retirement plans if they do not already have such disaster-related provisions. Such amendments must be made by the end of this year so that employees can take advantage of these provisions.