Supervisor Kate Murray and Sr. Councilman Anthony Santino today proposed that federal legislation be passed waiving penalty fees for premature IRA withdrawal for homeowners seeking to make house repairs in the wake of Hurricane Sandy. The officials also called upon federal representatives to strike down premature withdrawal penalties on other deferred payment investments such as 401K plans.
“Long Island has a long road to recovery ahead as a result of Hurricane Sandy’s devastating landfall here over a month ago,” said Supervisor Murray. “The extent of damage to many homes, businesses and infrastructure throughout our area is staggering. We should do everything possible to make the recovery process easier, including waiving penalties on the premature withdrawal of personal funds that families can use to make necessary repairs to their storm ravaged homes.”
“Neighbors are confronted with so many challenges presented by Hurricane Sandy,” added Sr. Councilman Santino. “We should do everything we can to make the recovery process easier, such as reducing the financial burden associated with home repairs.”
Although FEMA is administering reimbursements to pay for some damage expenses as well as administering the STEP Home Repair Program, homeowners and businesses may need to initially lay out money for the cost of necessary repairs. At the same time, many Americans have money invested in Individual Retirement Accounts (IRAs) and other deferred payment investments, however, penalties are imposed for premature withdrawal. Under these dire circumstances, residents need access to their capital…. without penalty! For example, if a homeowner needed access to money for a new roof, they would pay a 10% penalty for withdrawing the needed funds from their IRA. And, that’s in addition to a $40 administrative fee penalty that is charged by some financial institutions.
Supervisor Murray and Sr. Councilman Santino called upon U.S. Senator Charles Schumer, U.S. Senator Kirsten Gillibrand, U.S. Congressman Peter King and U.S. Congresswoman Carolyn McCarthy to propose such legislation, and to advocate on behalf of the thousands of families and businesses who are struggling to rebuild their homes and their lives.
Additionally, the town officials requested that federal legislators consider a measure that would implement five-year income averaging for income tax purposes. Such a measure would mitigate the income tax implications of a one-year spike in income associated with a large withdrawal from deferred payment plans that would be utilized for Sandy repairs.
“Time is of the essence,” concluded Supervisor Murray. “We implore the federal government to act quickly in order to assist our neighbors who are trying to get back on their feet. Providing penalty-free access to investment funds to make Sandy-related home repairs is one more way in which we can help those who have been slammed by Hurricane Sandy.”