SECURE 2.0: IRS Issues Fact Sheet on Disaster Relief Distributions and Plan Loans (2024)

The IRS recently issued a set of Frequently Asked Questions in Fact Sheet 2024-19, which address the special rules for distributions and plan loans for certain individuals impacted by major federally declared disasters under the SECURE 2.0 Act of 2022. Though not breaking much new ground, the fact sheet provides clear and helpful guidance to plan sponsors choosing to extend all or some of the distribution and/or loan relief to their employees in the wake of disasters.

These qualified disaster recovery provisions are optional, and plan sponsors may choose to adopt some or all of these provisions immediately or at a later date.

The May 3, 2024 Frequently Asked Questions (FAQs) are similar to past guidance the Internal Revenue Service (IRS) issued following large-scale federal disasters like Hurricane Katrina and COVID-19. Historically, the IRS and Congress released certain disaster relief exemptions with respect to retirement plans on a disaster-by-disaster basis. However, as noted in our previous LawFlash, SECURE 2.0 Act of 2022 (SECURE 2.0) made this relief permanent.


In order to take advantage of the disaster recovery relief, a participant must be a “qualified individual” who has been affected by a “qualified disaster” as described in more detail below:

  • Qualified disaster: A qualified disaster is any disaster the US president declares as a major disaster after December 27, 2020. The Federal Emergency Management Agency (FEMA) disaster declaration, as well as the incident period for a qualified disaster and the disaster area, can be found on FEMA’s website.
  • Qualified individual: A person whose principal residence is in the qualified disaster area during the incident period and experiences an economic loss because of the qualified disaster is a qualified individual. The FAQs define “economic loss” broadly to include real or personal property damage, displacement from home, or temporary or permanent layoffs.

Absent actual knowledge to the contrary, plans may rely on a participant’s reasonable representation of satisfaction of the eligibility criteria for disaster relief.


Qualified disaster recovery distributions are distributable events for 401(k), money purchase pension, 403(b), or governmental 457(b) plans. Qualified individuals may also take a qualified disaster recovery distribution from an individual retirement account (IRA).

  • Maximum Distribution Limit: Qualified disaster recovery distributions are limited to $22,000 per disaster for any qualified individual (across all plans and IRAs).
  • Repayments allowed: When the eligible retirement plan terms allow it, a qualified individual may repay all or part of a qualified disaster recovery distribution within three years of the date of receipt. In general, repayments are treated as rollover contributions. Plans that do not accept rollover contributions are not required to accept disaster recovery repayments. It should be noted that in addition to repayment of qualified disaster distributions, a first-time homebuyer who took a distribution to build or buy a residence in a qualified disaster area but did not build or buy due to a qualified disaster may also repay that distribution, even though the original distribution was not a qualified disaster recovery distribution. However, instead of the three-year repayment period above, the repayment must be made within the window to take a disaster recovery distribution ending on the latest of the three dates described below.
  • Timing of distributions: The window to take a disaster recovery distribution opens on the first day of the incident period for that qualified disaster and closes 180 days after the latest of (1) the first day of the incident period or (2) the date of the disaster declaration. For a distribution to a first-time homebuyer qualified individual to buy a residence in a qualified disaster area, the window begins 180 days before the first day of the incident period and ends 30 days after the last day of the incident period.
  • Tax treatment: Qualified disaster recovery distributions will not be subject to the 10% penalty tax on early distributions. For individuals, federal income taxes will be assessed over a three-year period starting in the year the qualified individual receives the distribution, unless the qualified individual elects to be taxed in full in the year of receipt.

Plan sponsors should note that even if the plan does not offer qualified disaster recovery distributions, qualified individuals who take a distribution from the plan based on another distributable event will still be able to treat these amounts as qualified disaster recovery distributions for their own taxes. This includes claiming the exception to the 10% early distribution tax on their tax returns and paying federal income tax over the three-year period described above.

So, employees may be able to take advantage of certain components of this disaster relief, even if their employer's plan does not specifically offer it.


The FAQs provide the following guidance regarding loans to qualified individuals affected by qualified disasters:

  • Increased loan limits: Plan sponsors may increase the dollar limit for plan loans from the lesser of 50% of the vested benefit or $50,000 to the lesser of 100% of the vested benefit or $100,000.
  • Additional repayment time: Plan sponsors may suspend loan payments due within 180 days after the last day of the incident period and extend the due dates for these payments up to one year. This suspension applies to any plan loan outstanding on or after the latest of (1) the first day of the incident period or (2) the date of the disaster declaration.


Plan sponsors can decide to adopt some or all of the relief or even continue to apply the relief on a disaster-by-disaster basis. Before deciding to adopt any relief, plan sponsors should coordinate with their recordkeepers and administrators to confirm that any desired changes can be administered. Plan sponsors will then wish to work with legal counsel to review loan policies, participant communications such as summary plan descriptions, and plan documents to confirm whether any amendments are needed. As a reminder, the deadlines to adopt required or discretionary plan amendments under SECURE 2.0 are as follows:

  • For non-collectively bargained qualified plans: December 31, 2026
  • For collectively bargained plans: December 31, 2028
  • For governmental qualified plans and public school 403(b) plans: December 31, 2029
  • For governmental 457(b) plans: December 31, 2029, or, if later, the first day of the plan year that is more than 180 days after the date of notification that administered inconsistently with 457(b) requirements.

Plan sponsors that decide not to adopt disaster relief by those deadlines may decide to do so in the future but must adopt any amendment by the end of the plan year in which the amendment is effective.

SECURE 2.0: IRS Issues Fact Sheet on Disaster Relief Distributions and Plan Loans (2024)
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