Regulatory Updates

Proposed Bill Would Provide Permanent Distribution Relief

Representatives Mike Thompson (D-CA) and Mike Kelly (R-PA) have introduced a bipartisan bill that would make permanent automatic retirement plan and IRA tax relief in connection with federally declared disasters. This proposed legislation is a companion to a bipartisan bill introduced by Senators Bill Cassidy (R-LA) and Robert Menendez (D-NJ) earlier this year.

The proposal follows previous disaster distribution guidance and provides for a waiver of the 10 percent early distribution penalty tax on distributions of up to $100,000 per disaster made to those who have a primary residence in the affected area and have sustained an economic loss. The relief would apply to distributions on or after the first day of the incident period of the disaster and within 180 days after the later of either the incident period, the date of enactment, or the applicable disaster declaration. The proposal also allows taxpayers to treat distributions as income ratably over a three-year period, and to recontribute a distribution to a plan or IRA within three years.

Additionally, the bill would allow recontributions of withdrawals for home purchase or construction in the event that the assets were not used for that purpose. The maximum amount available for a plan loan would also be increased to the lesser of $100,000 or the greater of $10,000 or 100 percent of the nonforfeitable benefit of the participant. A one-year extension of loan repayments would also be permitted for loan payments due on or after the first incident date of the disaster and within the subsequent 180-day period.

The bill was referred to House Committee on Ways and Means. It will be monitored for further developments.

Regulatory Updates

IRS Releases Draft Forms 1099-R and 5498 for 2023 Tax Year

IRS Releases Draft Forms 1099-R and 5498 for 2023 Tax Year

The IRS has posted draft versions of Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form 5498, IRA Contribution Information for tax year 2023.