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Retirement Account Withdrawal Rules Loosened by IRS

Date: September 8, 2017
Type: AFA Article

In recent days, the Internal Revenue Service announced additional tax relief for victims of Hurricane Harvey, by lifting the typical hurdles to accessing retirement funds. While it is usually difficult to qualify for an in-service distribution from your workplace retirement plan, that is before age 59 1/2, the IRS is bending these rules for storm victims as it has in the past.  Employer sponsored retirement plans, such as our 401(k), are able to make loans and hardship distributions to victims of Hurricane Harvey and members of their families with the usual hoops of getting at this money. Basically, any hardship arising from Hurricane Harvey is treated as an “unforeseeable emergency” for purposes of retirement plan distributions. In addition, some documentation requirements, which can be onerous, can be disregarded.

The special rules, spelled out in IRS Announcement 2017-11, apply between August 23, 2017 and January 31, 2018.  Keep in mind, these early withdrawals from a 401(k) come with a 10 percent penalty.  Before doing so, we strongly encourage you to consider all sources of additional funds. An alert has been placed on Fidelity’s NetBenefits site to notify participants of this option.

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