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New Federal Budget Law Impacts Retirement Plans   


On Friday, Feb. 9, the President signed a two-year federal budget law which included the following retirement plan related provisions:


It will remove the six-month prohibition on contributions to retirement plans after a hardship withdrawal

The legislation directs the IRS to change its administrative guidance to allow employees taking hardship distributions from a retirement plan to continue contributing to the plan. The revised regulations will apply to plan years beginning after Dec. 31, 2018. (Note: This had been included late last year in the House Bill but was then withdrawn in December during negotiations with the Senate) (This new provision will not take effect until 2019).

It will allow QNECs, QMACs and profit-sharing contributions to be included in a hardship withdrawal:

The legislation modifies the rules relating to hardship withdrawals from cash or deferred arrangements to permit employers to extend hardship distributions to amounts not previously permitted. It also would remove the requirement to take a loan before taking a hardship withdrawal. The provision applies to plan years beginning after Dec. 31, 2018. (This will also not take effect until 2019).

It provides IRS authority to release a levy on property held in retirement plans:

The legislation allows an individual to recontribute to an IRA or employer-sponsored plan an amount withdrawn (and any interest thereon) pursuant to a levy and later returned to the individual by the IRS. Contributions are allowed without regard to the normally applicable limits on IRA contributions and rollovers. The provision is effective for tax years beginning after Dec. 31, 2017. (This provision is not expected to affect many clients, but in the rare case of IRS returned levies, it could be significant.)

It provides special disaster-related rules for use of retirement funds for individuals impacted by the California wildfires:

An integrated solution can save the 401(k) provider time processing transactions and following up on missing plan information which may result in lower plan service fees.