Bill Text: NJ SR125 | 2012-2013 | Regular Session | Amended

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Bill Title: Urges Congress to exempt from penalties, 401(k) plan hardship distributions for expensives incurred due to natural disasters.*

Spectrum: Bipartisan Bill

Status: (Passed) 2013-11-18 - Filed with Secretary of State [SR125 Detail]

Download: New_Jersey-2012-SR125-Amended.html

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[First Reprint]

SENATE RESOLUTION No. 125

STATE OF NEW JERSEY

215th LEGISLATURE

 

INTRODUCED OCTOBER 17, 2013

 

 

Sponsored by:

Senator  BOB SMITH

District 17 (Middlesex and Somerset)

Senator  CHRISTOPHER "KIP" BATEMAN

District 16 (Hunterdon, Mercer, Middlesex and Somerset)

 

 

 

 

SYNOPSIS

     Urges Congress to exempt from penalties, 401(k) plan hardship distributions for expenses incurred due to natural disasters.

 

CURRENT VERSION OF TEXT

     As reported by the Senate Environment and Energy Committee on November 7, 2013, with amendments.

  

A Senate Resolution urging Congress to enact legislation exempting from penalties certain 401(k) plan hardship distributions for Superstorm Sandy or other natural disaster expenses.

 

Whereas, Superstorm Sandy caused significant damage to ¹,¹ and destruction of ¹,¹ property in New Jersey and other Northeast states  when it made landfall in October of 2012; and

Whereas, Many residents without access to other resources¹[,]¹ have no choice but to take early withdrawals from their federal Internal Revenue Code of 1986 section 401(k) savings plans in order to pay for the damage to their homes caused by natural disasters like Superstorm Sandy; and

Whereas, Early distributions from 401(k) plans are currently only permitted in certain circumstances, one of which is employee hardship, where there is an immediate and heavy financial need of the employee, such as repairs to the employee's principal residence, and the distribution is necessary to satisfy that financial need; and

Whereas, The employee cannot have other resources available to meet the financial need and must have exhausted all other available distributions and loans under any employer retirement plan before taking a hardship distribution; and

Whereas, Like other distributions that are not rolled over into another qualified plan or IRA, 401(k) hardship distributions are taxable income, but are also subject to an additional 10 percent tax for early withdrawal, and the employee cannot contribute to the plan for six months following the distribution; and

Whereas, Accordingly, hardship distributions are essentially a last resort, and as the law currently stands, an individual is further ¹[setback] disadvantaged¹ financially when met with taxation and penalties on that distribution; and

Whereas, Legislation that exempts 401(k) hardship distributions  from penalties would help those who have suffered losses from natural disasters to help themselves, while enabling them to continue to save for the future; and

Whereas, In order to assist those victims of Superstorm Sandy and future natural disasters to repair their homes and return to normalcy; now, therefore,

 

     Be It Resolved by the Senate of the State of New Jersey:

 

     1.    This House ¹[respectively] respectfully¹ urges Congress to pass legislation that exempts from penalties, hardship distributions from federal Internal Revenue Code of 1986 section 401(k) plans for expenses due to Superstorm Sandy or future natural disasters.

 

     2.    Duly authenticated copies of this resolution, signed by the President of the Senate and attested by the Secretary thereof, shall be transmitted to every member of the New Jersey Congressional delegation ¹, the Majority and Minority Leaders of the United States Senate, and the Speaker and Minority Leader of the United States House of Representatives¹ .