Hurricane Sandy

IRS Permits Hardship Distributions for those Impacted by Hurricane Sandy


Please be advised that the IRS has announced that it will begin permitting hardship distributions for those impacted by Hurricane Sandy.   

On November 16, 2012, the IRS issued Announcement 2012-44, which provides relief to taxpayers who are adversely affected by Hurricane Sandy and who have assets in retirement plans that they would like to use to alleviate hardships caused by Hurricane Sandy. This guidance covers relief regarding hardships distributions and loans from 401(a)/(k), 403(a), 403(b) plans, loans from public 457(b) plans, and unforeseeable emergency distributions from public and private 457(b) plans. Covered disaster areas can be found on at

Relief for Loans and Hardship Distributions:

The IRS has announced that plans can make hardship distributions or loans to employees and former employees living or employed in the Hurricane Sandy disaster area (or those with a spouse, child, grandchild, parent, grandparent or dependent in the disaster area), even if the plan had not previously allowed hardship distributions or loans. Covered disaster areas can be found on at If plans do not currently permit hardship distributions or loans, however, plan documents must be appropriately amended by the end of the 2013 plan year. For purposes of meeting applicable spousal consent requirements for loans or hardship distributions, this guidance permits a plan to accept the employee’s statement that his or her spouse is deceased without requiring a death certificate, if it is reasonable to believe that the spouse is deceased and the death certificate is obtained as soon as possible. Absent the death of the spouse, the normal spousal consent rules will continue to apply. This relief applies to hardships withdrawals or loans made between October 26, 2012 and February 1, 2013.

Hardship Withdrawal Relief:

This IRS Announcement permits plan administrators to rely on representations from employees as to the hardship need (and amount of the need) without requiring the employee to submit proof of the need unless the plan administrator has knowledge to the contrary. No safe harbor event is required for obtaining a hardship withdrawal and deferrals do not have to be suspended for six (6) months following the hardship withdrawal. While the Announcement is not entirely clear, it is reasonable to also not require participants to take all available loans before the hardship distribution is taken. Plans cannot make hardship distributions of amounts that are not eligible for hardship distributions under the IRC, such as employer contributions to 403(b) (7) mutual funds or earnings on elective contributions. The IRS guidance does not waive the 10% penalty tax for premature retirement plan distributions including Sandy-related hardship withdrawals.

Plan Loans Relief:

Under Announcement 2012-44, the plan may disregard procedural requirements regarding loans imposed by the terms of the plan until February 1, 2013. However, as soon as practicable, the plan administrator must make a reasonable attempt to assemble any forgone documentation. For example, if spousal consent is required, and plan terms require a death certificate, the plan will not be disqualified for failing to operate in accordance with plan terms if the employee claims their spouse is deceased, it is reasonable to believe the spouse is dead and the plan administrator makes reasonable efforts to obtain the death certificate as soon as practicable. Absent the death of the spouse, the normal spousal consent rules will continue to apply.

The relief provided to Sandy victims is not as broad as the relief provided for Hurricane Katrina victims in 2005. Under the IRS Sandy guidance, the IRS is not increasing the maximum loan amount that is permitted (as it did after Katrina); nor are loan repayments being deferred. 

Additional Information:


Please contact your campus Human Resources or Benefits Office if you have any questions or require assistance in obtaining a qualifying hardship distribution for needs related to Hurricane Sandy.