Hurricane Katrina Legislation and Vantagepoint IRAs
October 13, 2005
On September 23, 2005, President Bush signed into law the Katrina Emergency Tax Relief Act of 2005 (KETRA). This legislation provides relief for qualified distributions from certain qualified retirement plans, including IRAs, 457 and 401 plans to eligible individuals. We strongly suggest you consult with a tax advisor or attorney before requesting a distribution.
As it pertains to IRAs:
Definitions
Eligible Individual: Principal place of residence on August 28, 2005 located in a Hurricane Katrina disaster area and who sustained an economic loss by reason of Hurricane Katrina. This area includes Alabama, Mississippi, Louisiana and Florida.
Qualified Distribution: A qualified distribution must be from an “Eligible Retirement Plan,” must be taken by an “Eligible Individual” and cannot exceed $100,000.
Eligible Retirement Plan: IRAs, qualified retirement plans, qualified annuities, 403(b) plans and 457 plans.
Distributions
- Qualified distributions made on or after August 25, 2005 and before January 1, 2007 will not be subject to the 10% early distribution penalty
- The maximum distribution limit cannot exceed $100,000 aggregated across all plans (amounts in excess of $100,000 will not receive favorable tax treatment)
Rollovers
- The qualified distribution may be rolled over into an IRA or qualified plan within 3 years from the date of distribution
Tax Consequences
- Included as taxable income
- Can be spread ratably over 3 years or included in total for the year it was distributed
Special Rollover Provision for Cancelled Home Purchase:
- If the distribution was received after February 28, 2005 and before August 29, 2005 and the distribution was requested to purchase a primary residence that was subsequently not purchased or constructed due to Hurricane Katrina, then that distribution can be rolled over
- The distribution will not be treated as income or subject to the 10% early distribution penalty
How ICMA-RC Will Assist You
If you qualify for a distribution from your Vantagepoint IRA due to these circumstances, please contact Investor Services toll free weekdays at 1-800-669-7400 from 8:30 a.m to 9:00 p.m. Eastern time to request the appropriate form. For your records, mark “Hurricane Katrina” on the forms.