Filing extensions

The IRS has issued a list of filing and notice extensions that apply in disaster situations. For taxpayers impacted by the wildfires in California, various deadlines are postponed to October 15, 2025. The Form 5500 annual report filing date is also postponed through that date for organizations affected by the wildfires.

The IRS announcement also triggers parallel delays in PBGC and DOL Form 5500 due dates. The PBGC’s website specifies what filings usually made with the PBGC, such as premium filings and payments, 4010 filings and certain, but not all, reportable events, are automatically delayed in the case of disaster.

Distribution and loan availability

Plans, depending on the type, are limited in their ability to provide participants with money quickly. However, the law provides some exceptions and special relief for presidentially declared disasters. These include:

• Hardship distributions
• Unforeseeable emergency distributions (governmental 457(b) plans)
• Emergency distributions
• Special distributions up to $22,000
• Increased loan amounts and delayed repayment

General rules on distributions and loans

DB plans and money purchase plans generally may not distribute benefits until a participant separates from service, retires, dies or becomes disabled. However, plans can allow in-service (while still working) distributions as early as age 59½.

Profit-sharing plans, a type of DC plan, generally may make in-service distributions at any time. However, if the profit-sharing plan contains a 401(k) arrangement, elective contributions and certain other contributions and earnings may not be distributed until age 59½ unless the participant separates from service, retires, dies or becomes disabled, or meets the requirements for a hardship distribution. Section 403(b) plans generally have similar rules.

A participant may receive a hardship distribution if the participant certifies to an immediate and heavy financial need on account of hardship. The Treasury Department deems certain events to meet this standard. Most relevant in the case of the California wildfires are:

• Costs necessary to purchase a principal residence for the employee
• Certain expenses for the repair of the employee’s principal residence
• Expenses and losses (including loss of income) on account of certain FEMA-declared disasters

Similarly, a participant in a governmental 457(b) plan may receive an unforeseeable emergency distribution for property losses to the employee’s or a beneficiary’s property caused by the California wildfires not covered by homeowner’s insurance. This would include the cost to repair or replace the home as a result of the damage.

In most cases where a separated participant receives a distribution prior to age 59½, the distribution is subject to a 10 percent early distribution tax. Note that distributions from a governmental 4547(b) plan are never subject to the early distribution tax.

Plans generally may provide loans to participants up to the lesser of $50,000 or one-half the participant’s account balance or accrued benefit.

SECURE 2.0 emergency and disaster relief

The SECURE 2.0 Act (SECURE 2.0) provided additional opportunities for plans to make distributions to participants for emergencies and disasters.

Emergency withdrawals

A profit-sharing, money purchase, 403(b) plan or governmental 457(b) plan may allow a participant to take an in-service distribution of up to $1,000 if the participant certifies it is for an emergency. The participant need not specify the emergency. The distribution is not subject to the 10 percent premature distribution tax.

Automatic disaster relief

For many years, every time there was a presidentially declared disaster, Congress would pass special provisions allowing for special in-service distribution and loans. Each time, plans would have to wait until the legislation was enacted. Eventually, the law was changed so the relief was automatically triggered if the plan adopted an amendment after the disaster was declared. SECURE 2.0 allows plans to include the disaster provisions in the plan and provide for automatic triggering.

The automatic disaster relief allows 401(k) plans, 403(b) plans and governmental 457(b) plans to allow special distributions (in-service) up to $22,000 in the case of a presidentially declared disaster. The distribution is exempt from the 10 percent premature distribution tax.

In addition, the plan may increase the available loan amount from the lesser of $50,000 or one-half the vested account balance to the lesser of $100,000 or the entire vested account balance. Loan repayments may be delayed with payment amounts recalculated.

SECURE 2.0 also provided a special rule permitting individuals to recontribute distributions from 401(k) and 403(b) plans if the distribution was intended to purchase a principal residence in a disaster area and that residence was not purchased or constructed because of the disaster.

Considerations for plan sponsors

Plans may operationally provide for emergency distributions, hardship distributions and special disaster distributions and loans even though plan amendments have not yet been adopted. Generally, single-employer plans will have until December 31, 2026, and collectively bargained plans until December 31, 2028, to adopt retroactive amendments.

The plan amendment may provide for automatic triggering of the options or may provide for triggering on a case-by-case basis. A plan may provide for some of the options (e.g., $22,000 distributions) without providing for others (e.g., increased loans).

If the plan is going to make any of these special provisions available, it will need to communicate them clearly to affected participants.