It’s been a while, but we finally have them! Late last month, the IRS published the final hardship distribution regulations, nearly two years after Congress passed the Bipartisan Budget Act and the Tax Cuts and Jobs Act. The good news is that this final version follows the proposed version very closely. So closely in fact, that the IRS outright states in the final version that any plan that followed the proposed regulations will satisfy the final regulations.
Topic Archive: Hardship Distributions
When we set up our new 401(k) plan last year, we decided not to add a safe harbor provision because we were not in a position to commit to the required contribution. Then we heard our TPA say something about our deferral deposits fitting within the safe harbor deadline. Now I’m just confused.
Our company has several wholly-owned subsidiaries, and each of them has signed onto our 401(k) plan as participating employers. We sold 100% of the stock of one of those subsidiaries – Glen’s Fiddich, LLC – to an unrelated company. As a result of the sale, Glen’s Fiddich is no longer related to us and has discontinued participation in our retirement plan as of January 1, 2019. The employees of Glen’s Fiddich are now participating in the purchasing entity’s retirement plan, and a few of them are eager to roll their accounts from our plan into the new plan.
Our company sponsors a 401(k) plan. One of our participants lives in the Florida panhandle and lost her home in Hurricane Michael. She is under age 59 ½ and is not eligible to take in-service withdrawal, and a loan would only impose a greater burden. I’ve not seen any direct guidance that permits hardships distributions for those affected by Hurricane Michael the way I have for previous federally declared natural disasters. She really needs the cash to rebuild her home, but I do not want to approve a hardship that isn’t allowed.
I sponsor a 401(k) Plan for myself and my staff. I recently processed a hardship distribution for the purchase of my primary residence in October 2018. I know the rules require me to suspend my deferral elections for six months following a hardship distribution, but I recently came across an article that said I don’t have to impose the suspension anymore. I’d really like the opportunity to continue deferring if I am allowed.
Nearly a year after Congress passed changes to the hardship distribution rules in the Bipartisan Budget Act and the Tax Cuts and Jobs Act, the IRS has published proposed regulations to fill in some of the details on how to implement the new rules.
One of the participants in our 401(k) plan submitted a request for a hardship distribution for the purchase of a primary residence. On review of the supporting documentation, we discovered that the purchase has already occurred and that the requested distribution is to cover the cost of renovations prior to moving in.
All of us here at DWC thrive on the really geeky stuff, and some of the best discussions start with Adam and Keith’s pontifications about how different topics impact our clients and our industry. We decided to bring the best of those conversations to you, still with a touch of geekiness but also distilled into easily digested, bite-sized pieces. Anyone can summarize a summary and call it commentary or analysis. But as always, our commentary is based on reading the actual rules, regulations, executive orders, and advisory opinions. - As originally published in our Q3 401(k) Q&A Update newsletter.
401(k) Distribution Rules: After Taking a Hardship Distribution, How Quickly Must a Participant Stop 401(k) Contributions?
A participant in our 401(k) plan recently took a hardship distribution. We know we are supposed to suspend his deferrals for six months following the distribution, but we are not entirely clear on how strict that timing is and what happens at the end of the six months.
In the wee hours of this morning, Congress passed a spending bill to end the most recent government shutdown that had just begun at midnight. Although the bill was focused on funding the government and dealt with military spending and other items, a couple of retirement-plan-related provisions managed to find their way in.