Hardship Due to Personal Casualty after TCJA

[John Feldt ERPA CPC QPA]

TCJA changed Code Section 165(h) of the law that defined a casualty loss. That same section of the code is referenced in the safe harbor hardship rules. Under the new language, expenses for repair of damage due to a participant's principal residence would not be available for hardship unless included under a federally declared disaster area.

Are folks modifying their safe harbor hardship procedures to restrict casualty hardship to comply with this?

[Madison71]

We are modifying our procedures as ours are subject to the safe harbor hardship rules.  I am sure it was an oversight and hope that the IRS will clarify that a casualty loss for purposes of determining whether a participant has experienced an “immediate and heavy financial need” should not be affected by HR 1’s changes to the definition of casualty loss.

[Peter Gulia]

But UNTIL the Secretary of the Treasury makes a new rule or regulation and it becomes effective and applicable or the Commissioner of Internal Revenue "prescribe additional guidance of general applicability" (within 26 C.F.R. 1.401(k)-1(d)(3)(v)) and publishes it in the Internal Revenue Bulletin, do BenefitsLink mavens agree that one must administer a deemed-need provision by limiting a casualty hardship to "expenses ... that would qualify for the casualty deduction under [Internal Revenue Code] section 165" as Congress's Act changed it?

 

[Peter Gulia]

I didn't write the strikeout, and that text is my query.

Must one apply the rule's reference to the Internal Revenue Code as it now reads?

 

[LANDO]

Our document (Word for Word Adopter ASCi VS) is pretty darn specific, and defines the Safe Harbor as the amount necessary "to pay expenses to repair damage to the Participant's principal residence that would qualify for a casualty loss deduction under Code Sect 165..."

It would pretty hard to make the argument that a hardship request after the effective date of TCJA that didn't qualify under 165 as amended still meets the requirements under our document.