Congress is moving to free up retirement plan assets for Katrina survivors and encourage taxpayers to donate individual retirement account assets to Katrina relief efforts.[@@]
Sens. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, and Max Baucus, D-Mont., the most senior Democrat on the committee, today introduced the bill, and House Ways and Means Committee Chairman Rep. Bill Thomas, R-Calif., is preparing to introduce a similar bill.
The number of the Senate bill is not yet available.
Most observers are expecting the Katrina relief package to pass quickly.
The Grassley-Baucus bill would:
- Waive the 10% penalty for early withdrawal of retirement plan funds for individuals from federally declared disaster areas. This provision would apply to individual retirement accounts, defined benefit pension plans, 401(k) plans and 403(b) plans.
Individuals eligible for this waiver because of Katrina would be permitted to pay income tax on such distributions over a 3-year period, according to summary of the bill released by the Senate Finance Committee. Amounts distributed could be re-contributed to a qualified retirement plan over the 3-year period following the distribution date and receive rollover treatment.
Distributions for home purchases which were not finalized because of Hurricane Katrina also could be re-contributed to a qualified retirement plan or IRA.