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County staff explain Secure Act 2.0 option allowing up to $22,000 457 withdrawals for federally declared disasters
Summary
County counsel and staff explained a Secure Act 2.0 provision allowing employees affected by federally declared disasters to withdraw up to $22,000 from 457(b) accounts without the 10% early-withdrawal penalty; taxes on pretax money still apply and repayment within three years is optional.
Staff presented a new policy option under the Secure Act 2.0 that would allow employees affected by a federally recognized disaster to access up to $22,000 from their 457(b) retirement accounts without incurring the 10% early-withdrawal penalty.
"So, what this does is it allows when there is a federally recognized natural disaster, it allows anyone that received economic impact from that negative economic impact from that to pull up to 22,000, as Sheena said, from their 457B account," said Thomas Henry, assistant county counselor.
Commissioners pressed for clarity about taxes and qualification. Staff clarified that the 10% penalty is waived, but taxes are still due on pretax withdrawals and Roth funds generally are tax-free because taxes were paid when contributed. Henry also said repayment within three years is an option but not required.
Commissioner Howe asked whether a county emergency declaration would trigger the benefit; staff answered the trigger is a federally recognized event and not a county-only declaration.
The board did not adopt a policy in this preview; staff presented the mechanism and answered technical questions about tax and administrative procedures for employees and plan administrators.
