Tax Cuts and Jobs Act

Tuesday, May 1, 2018

The tax bill enacted on December 22, 2017 contained only minor changes for retirement plans.

-Rolling Over an Offset Plan Loan

The biggest change is the extension of the rollover deadline for plan loan offsets. Plan loan offsets occur when a participant with an outstanding loan terminates employment or when the plan terminates. The outstanding plan loan amount can be rolled over tax-free to another retirement plan or IRA.  Under the prior law, the deadline to rollover an offset participant plan loan balance was 60 days after the date of distribution from the retirement plan.  The new law extends the deadline to the due date of the participant's federal income tax return (including extensions).

Note that this does not impact the process your qualified retirement plan follows. It impacts the options the terminated participant has AFTER they take a distribution from the qualified plan and their loan defaults. Now a participant has more time to potentially change the taxable event their loan default created. This provision is effective for outstanding loans treated as offset in tax years beginning after December 31, 2017.

-Distributions Allowed for Hurricane Damage Relief

Another change is that  distributions may be allowed to a participant whose principal residence was in a hurricane Harvey, Irma and Maria declared disaster area as long as the distribution is issued before January 1, 2019 and the participant suffered economic loss due to the disaster.  Other requirements apply to these distributions.

NOTE: Allowing any of the above changes to a plan's distribution provisions are optional and plan documents would need to be amended to adopt these changes.