My husband changed employers in July 2016 and in August 2016 we were faced with devastating floods and our area was declared a federal disaster. We haven't rolled over the balance of his 401k yet because we need to take a partial withdrawal to help with rebuilding.
His former employer said we're only able to take a lump sum distribution or rollover the balance to the new Co. The new employer states that they can't do the hardship withdrawal if we transfer it to them because it's not part of the Co. plan.
From what we were told by someone, we should be able to make a hardship withdrawal without the 10% penalty because the IRS has waived the penalty
Until January 17, 2017.
How can we take advantage of the IRS ruling if the former or current plan says they don't allow it?

Retirement plans can provide relief to employees and certain members of their families who live or work in the disaster area. To qualify for the relief, hardship withdrawals must be made by Jan. 17, 2017. The relief means that a retirement plan can allow a Louisiana flood victim to take a hardship distribution or borrow up to the specified statutory limits from the victim?s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.
Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. In addition, the plan can ignore the reasons that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement as described in the announcement.
Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less. Under current law, hardship distributions are generally taxable. Also, a 10 percent early-withdrawal tax usually applies.