General Retirement Plan Provisions

Katrina Emergency Tax Relief Act of 2005 (KETRA) and the Gulf Opportunity Zone Act of 2005

Neither State Farm ® nor its agents provide tax or legal advice. Seek legal or tax advice regarding your particular distribution situation from your own advisor.

Tax-Favored Withdrawals

The Katrina Emergency Tax Relief Act of 2005 (KETRA) and the Gulf Opportunity Zone Act of 2005 provide that the 10 percent penalty tax on early distributions will not apply to qualified hurricane distributions. In general, "qualified hurricane distributions" are distributions made from a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b) or Profit Sharing account/plan:

• on or after August 25, 2005 and before January 1, 2007 to an individual whose principal place of abode on August 28, 2005 was located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina.
  

• on or after September 23, 2005 and before January 1, 2007 to an individual whose principal place of abode on September 23, 2005 was located in the Hurricane Rita disaster area and who has sustained an economic loss by reason of Hurricane Rita.

• on or after October 23, 2005 and before January 1, 2007 to an individual whose principal place of abode on October 23, 2005 was located in the Hurricane Wilma disaster area and who has sustained an economic loss by reason of Hurricane Wilma.
  
  

Note: The states designated as disaster areas for purposes of these Acts are as follows:

• Hurricane Katrina - Louisiana, Mississippi, Alabama and Florida.
• Hurricane Rita - Texas and Louisiana
• Hurricane Wilma - Florida

Penalty-free distributions under these provisions are limited to $100,000 per individual. Any qualified hurricane distributions required to be included in gross income for the taxable year of the distribution may be spread over a taxable three-year period. The amounts are exempt from mandatory withholding rules.

Recontributions

An individual who receives a qualified hurricane distribution (as defined above) may recontribute the amount disbursed to an eligible retirement plan any time within the three-year period following the date the distribution was made.

In addition, individuals who took hardship distributions from their 401(k) plans or 403(b) arrangements and those who took distributions from their IRAs for the purpose of purchasing or constructing a principal residence in a Hurricane Katrina, Hurricane Rita or Hurricane Wilma disaster area may recontribute the amount disbursed to an eligible retirement plan if the residence was not purchased or constructed on account of Hurricane Katrina, Hurricane Rita or Hurricane Wilma.

• Hurricane Katrina distributions must have been received after February 28, 2005 and before August 29, 2005. The recontribution must be made during the period beginning August 25, 2005 and ending on February 28, 2006.
  

• Hurricane Rita distributions must have been received after February 28, 2005 and before September 24, 2005. The recontribution must be made during the period beginning September 23, 2005 and ending on February 28, 2006.
  

• Hurricane Wilma distributions must have been received after February 28, 2005 and before October 24, 2005. The recontribution must be made during the period beginning October 23, 2005 and ending on February 28, 2006.
  

The recontributed portions of hurricane distributions are excludable from income. Taxpayers may amend earlier income tax returns to claim a refund of income tax attributable to amounts previously included in income and subsequently recontributed.

Note: When submitting recontributions to State Farm ®, you must clearly designate in writing the amount to be treated as a recontribution (rollover) of a Hurricane Katrina, Hurricane Rita or Hurricane Wilma distribution. Required minimum distributions (RMDs) and certain periodic payments (as defined by the IRS) are not permitted to be recontributed.

Loans from Qualified Plans

Limits on plan loans are increased from $50,000 to $100,000 (limited to 100 percent of individual vested account balance) for individuals whose principal place of abode:

• on August 28, 2005 is located in the Hurricane Katrina disaster area and who sustained an economic loss by reason of Hurricane Katrina. The plan loan must be received during the period beginning September 24, 2005 and ending December 31, 2006. Repayment of plan loans outstanding on or after August 25, 2005 may be delayed for one year if the due date occurs during the period beginning on August 25, 2005 and ending on December 31, 2006.
  
  

• on September 23, 2005 is located in the Hurricane Rita disaster area and who sustained an economic loss by reason of Hurricane Rita. The plan loan must be received during the period beginning December 21, 2005 and ending December 31, 2006. Repayment of plan loans outstanding on or after September 23, 2005 may be delayed for one year if the due date occurs during the period beginning on September 23, 2005 and ending on December 31, 2006.
  
  

• on October 23, 2005 is located in the Hurricane Wilma disaster area and who sustained an economic loss by reason of Hurricane Wilma. The plan loan must be received during the period beginning December 21, 2005 and ending December 31, 2006. Repayment of plan loans outstanding on or after October 23, 2005 may be delayed for one year if the due date occurs during the period beginning on October 23, 2005 and ending on December 31, 2006.
  
  

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