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Last year, in response to the COVID-19 pandemic, the United States Congress and the Puerto Rico Department of Treasury (Hacienda) granted favorable tax treatment to coronavirus-related distributions (CRDs) and participant loans from U.S.-qualified plans and Puerto Rico-qualified plans, respectively. Recently, both jurisdictions extended similar tax treatment to certain distributions, hardship withdrawals, and plan loans related to non-COVID-19 disasters.
U.S. Disaster Relief Rules
Section 302 of the Consolidated Appropriations Act (CAA), 2021 provides special tax relief to make it easier for participants to access funds from their tax qualified retirement plans to recover from disaster losses. Under the CAA, a “qualified disaster area” is defined as any area where a major disaster is declared by the president under the Stafford Act between January 1, 2020, and February 25, 2021, if the incident period begins between