New Federal Legislation Allows Guardsmen and Reservists to Take Early Disbursements From Retirement Funds

Wendy K. Voss

Congress recently amended the IRS Code by enacting the Guardsmen and Reservists Financial Relief Act of 2004.  Pursuant to the Act, reservists or national guardsmen who are called to active duty for a period of at least 179 days, or for an indefinite period, to make penalty-free, early withdrawals from their IRAs or 401(k) plans.  The Act retroactively covers members of the Guard and Reserve who were called to service beginning on September 11, 2001, and extends coverage to those who may continue to be called to active duty through September 12, 2005.  Recent studies show that up to 41% of such individuals suffer a loss of income due to their military service.

Additionally, the Act provides that reservists or national guardsmen may repay the amount of any distribution at any time during the two-year period after the end of the active duty period.  To permit repayment, reservists and guardsmen will receive an exemption from limitations on individual retirement plan contributions during the applicable two-year period.

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Wendy K. Voss is a partner at Potter Anderson & Corroon LLP.  The views expressed in this article are those of the author and may not reflect the views of Potter Anderson & Corroon LLP or its clients.  Nothing in this website or the publications included in this website is intended to create an attorney-client relationship.  This publication should not be deemed legal advice and should not be relied on by you as legal advice related to your particular circumstances.