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Defined Contribution & Savings
Plan Alert
September 29, 2008
256 words
Hill Mulls Tax Relief For Disaster Victims
Authority to double the ceiling on how much a participant can borrow from a defined contribution plan is included in a bill targeted for passage before an early October adjournment. But the relief would only last until Jan. 1, 2010, and would be available only to victims of Midwestern disasters. The existence of this provision could tempt lawmakers from other disaster-prone areas to seek similar treatment for residents of their states.The bill, H.R. 6049, stands a good chance of passage because it would extend the lives of several expiring tax provisions that are highly valued by the industries they affect.Beneficiaries of the hike in the loan limit would be limited, according to a summary provided by the Senate Finance Committee, to those in 401(k), 403(b) and 457 plans who are "located in a Midwestern disaster area and who sustained economic loss by reason of the tornadoes and floods giving rise to the designation of the area as a disaster area."These individuals would be permitted to receive plan loans of up to $100,000 or 100 % of the vested accrued benefit for any loans they take out between the date of the bill's enactment and Jan. 1, 2010. Currently, loans may be as large as $50,000.Additionally, older loans for which repayment is due between the passage of the bill and Jan. 1, 2010, could have their repayment dates delayed an additional 12 months. Since last June, a bipartisan group of influential Midwestern senators, including Sen. Barack Obama (D-Ill.), have been seeking passage of this kind of tax relief.
October 14, 2008
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