September 2022 Compliance

As a result of Hurricane Fiona, certain special disaster distributions may be allowed for qualified retirement plans and individual retirement accounts (IRA) established under the Internal Revenue Code of Puerto Rico of 2011. Please note that this does not change distribution provisions for retirement plans or IRAs qualified within the United States.

Background

Puerto Rico Governor Pedro Pierluisi issued an executive order on September17, 2022, declaring a state of emergency due to Hurricane Fiona. On September 27, 2022, the Puerto Rico Department of the Treasury activated the Distributions Due to a Disaster Declared by the Governor under the Puerto Rico Internal Revenue Code. As a result, qualified retirement plans and IRAs established under the Internal Revenue Code of Puerto Rico of 2011 may allow for certain distributions as a result of Hurricane Fiona.

Eligibility Requirements

Distributions may be a total or partial distribution to active or terminated individuals used to cover eligible expenses. Annuities or installment payments, though, will not be considered eligible distributions.
Other plan distribution options, such as loans, are not required prior to requesting the special disaster distribution.
The first $10,000 is not subject to withholding.
Total distributions for this purpose may not exceed $100,000.
Distributions must be made from pre-tax contributions and earnings first.
Any distribution in excess of$10,000 will be subject to a special 10% tax instead of any other tax imposed by Puerto Rico, including the Alternate Basic Tax.
Individuals must be a resident of Puerto Rico for the entire 2022 tax year.
Eligible expenses include, but are not limited to: Expenses to repair a residence, motor vehicle, or business
- Expenses needed to verify that the property meets established construction codes
- Expenses incurred to acquire a new principal residence or business
- Payment of medical expenses
- Replacement or repair of furniture
- Food or gas purchases
- Repair power generators
- Lodging and meal expenses during the recovery period as a result of total or partial destruction of principal residence.
Available to participants, their spouse, descendants, or ascendants.
Contributions will not be suspended after this special disaster distribution.

Effective Date

Distributions must be made between October 6, 2022, and December 31, 2022. It is not necessary, though, for the expenses related to the special disaster distribution to be incurred within this period. In other words, a distribution may be requested during the eligibility period in order to defray eligible expenses incurred at a later date.

The subject matter in this communication is educational only and provided with the understanding that Principal^® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Company^®, a member of the Principal Financial Group^®, Des Moines, IA 50392. Principal Life Insurance Company, Des Moines,Iowa 50392-0001, www.principal.com. Principal^®, Principal Financial Group^® and the Principal logo design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and service marks of Principal Financial Services, Inc., in various countries around the world.

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