The revised list of hardshipwithdrawals would apply to money drawn on or after January 1, 2018.(Photo: Diego M. Radzinschi/ALM)
The Internal Revenue Service has issued a proposal accountingfor new rules on hardship withdrawals from defined contributionsplans passed in the Bipartisan Budget Act of 2018.
Under existing rules,
- Hardship distributions can only be taken when a participantsuffers “an immediate and heavy financial need.”
- The distribution can't be greater than the amount of money theparticipant needs.
- And the participant must first exhaust other avenues ofliquidity, like a plan loan or distribution from an employee stockownership plan.
Currently, a safe harbor provides six types of expenses thatqualify for a hardship distribution. If a hardship distribution istaken, participant deferrals to savings plans are suspended for sixmonths.
What the Bipartisan Budget Act did
The Bipartisan Budget Act modified the rules on hardshipwithdrawals by removing the six-month prohibition on deferrals, andallowing participants to access not only the deferrals they made,but also the earnings on those deferrals and money from employermatches and the earnings on them.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
