Cassidy, Menendez Introduce Legislation to Remove Financial Penalties for Individuals, Get Families Back on Their Feet After from Natural Disasters
WASHINGTON – U.S. Senators Bill Cassidy, M.D. (R-LA) and Bob Menendez (D-NJ) today introduced a bill to expedite relief to those impacted by natural disasters. With this bill, individuals impacted by hurricanes, floods, wildfires, etc. are able to access their retirement benefits without being forced to pay any withdrawal fees or penalties or wait for Congress to take action. They will have access to their benefits in order to cover emergency costs stemming from natural disasters.
“When disaster hits, families and business owners should not be penalized when using their savings while trying to get back on their feet. Saving for retirement is hard enough, let alone during disasters,” said Dr. Cassidy.
“Victims of disasters deserve a quick response from the federal government when they need it the most. As we have learned from the devastating effects of superstorm Sandy in New Jersey, the disparate treatment of victims affected by natural disasters is unfair and ultimately counterproductive for recovery efforts,” said Sen. Menendez. “Our bipartisan bill would fix this issue by permanently providing relief measures that would automatically apply once a Presidential disaster declaration is issued, directly helping victims instead of having them wait for Congressional action.”
When unexpected disasters hit our communities, many are left wondering how they will put a roof over their head and pay for it. When these disasters occur, many turn to their retirement plans commonly known as 401(k)’s to cover costs. But individuals are restricted from doing so without paying the required penalties, such as the 10 percent withdrawal fee. Congress usually steps in to waive the penalties to pay for costs incurred by the disaster, such was the case with COVID.
When natural disasters hit, however, Congress rarely acts the next day. While the President can issue a disaster declaration and trigger Federal Emergency Management Agency’s (FEMA) authorization to act immediately, Congress might take weeks – if not months – to provide assistance, such as waiving the withdrawal fee for those affected by the disaster. Meanwhile, if your home was just destroyed, you need financial relief immediately. This was the case with Hurricane Katrina, when it took Congress four weeks after the hurricane made landfall to pass the Katrina Emergency Tax Relief Act.
“Every year tens of thousands of Americans are victims of disasters from floods, tornadoes, hurricanes, forest fires, or more recently a global health pandemic. But because there are not permanent rules on the use of retirement funds by individuals impacted by these situations, victims are dependent upon Congressional action after the occurrence of each disaster. The ARA strongly supports permanent retirement plan tax relief measures that would automatically apply once a Presidential disaster declaration is issued. ARA applauds and supports Senators Cassidy and Menendez’s legislation that would make eligibility for these distributions in these circumstances permanent,” said the American Retirement Association.
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