Members of the House Ways and Means Committee have introduced bipartisan legislation that would allow survivors of natural disasters to withdraw funds from their retirement accounts for emergency expenses without fees or penalties.
U.S. Representatives Mike Thompson, D-California, and Mike Kelly, R-Pennsylvania, say the Disaster Retirement Savings Act of 2021 would allow natural disaster victims to withdraw funds from their retirement accounts to pay for emergency costs and that the legislation is needed to assist survivors. Congress often acts after a disaster is declared to provide relief, but not soon enough, and survivors are uncertain when or if relief will be forthcoming, say the bill’s sponsors.
Under current law, natural disaster survivors are subject to up to 20% withholding and 10% in tax penalties if they draw from retirement funds to cover emergency disaster costs. Survivors must often wait for the IRS to act to access funds without penalty.
With the new legislation, tax relief would be automatically triggered if the president issues a federal disaster declaration.
“Survivors of a natural disaster deserve to know that the federal government is working to help them respond and recover from the moment the emergency begins,” Thompson says. “We must pass this bill as soon as possible to be prepared.”
The bill would provide much-needed relief for survivors of natural disasters, such as the wildfires that roiled California this year and recent tornadoes that tore through several states, Kelly adds.
“Americans should not be penalized for withdrawing their hard-earned retirement money to cover emergency costs stemming from a natural disaster,” he says.
The bill would allow survivors of natural disasters to access $100,000 of retirement funds after a federally declared disaster without paying fees or penalties. Funds can be used to cover costs including emergency housing and can be repaid over three years.
The entire text of the bill is available here.