Bill Would Waive Some 401(k) Withdrawal Penalties

Under proposed legislation, participants undergoing specific financial hardships would get some relief on 401(k) penalties.

Congressman Robert Latta (R-Ohio) introduced H. R. 2331, the Individual Recovery Assistance Act of 2009, which waives the 10% penalty on early withdrawals from qualified retirement plans for participants who meet two specific conditions:

  • those who use the funds to make mortgage payments on a primary residence;
  • those who have lost jobs and have received unemployment compensation for 12 consecutive weeks.

These two exceptions would apply for one year, dating from passage of the bill.

The bill would also to increase the age at which distributions from qualified retirement plans are required to begin from 70 1/2 to 75.

The text of H.R. 2331 is online here.