Topic Archive: Hardship Distributions

Can We Allow a Distribution for a Coronavirus-Related Hardship?

DWC | 03/31/20

Facts

Some of our employees are dealing with financial challenges due to the coronavirus situation, and they are asking whether they can access their 401(k) accounts.  Our plan allows for loans and for in-service distributions at age 59 ½, but some of these employees are younger than that.  As a plan sponsor, I’ve always felt strongly that our 401(k) plan was a tool to save for retirement; however, these are unprecedented times, and I’d like to find ways to support my employees’ needs.

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DWC News Update | The CARES Act: Federal Coronavirus Relief

DWC | 03/30/20

On Friday afternoon, March 27th, Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security (CARES) Act - sweeping legislation intended to provide much-needed relief due to the coronavirus public health emergency.  At nearly 1,000 pages in total, the legislation covers a lot of ground in a many areas.  With respect to company-sponsored retirement plans, the relief focuses on four areas:

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Do We Still Need to Suspend Deferrals Following a Hardship Distribution?

DWC | 02/25/20

Facts

Larry and Kent are both participants in our company’s 401(k) plan.  Both recently went back to school on a part-time basis to pursue graduate degrees and will continue working for us.  Each of them took hardship distributions to help pay for tuition, Larry on September 18, 2019, and Kent on January 3, 2020.  Both of them would like to resume making contributions to the plan as soon as possible.

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DWC News Update | Two Years in the Making: The Final IRS Hardship Distribution Regulations Are Here

DWC | 10/24/19

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.

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What Does Safe Harbor Mean, Exactly?

DWC | 05/28/19

Facts

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.

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Can Employees from a Former Subsidiary Take a Distribution from our 401k Plan?

DWC | 03/12/19

Facts

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.

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Hardships & Hurricanes: What are the Hardship Rules Following a Natural Disaster?

DWC | 12/18/18

Facts

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.

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Are We Still Required to Suspend Deferrals Following a Hardship Distribution?

DWC | 12/11/18

Facts

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.

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Breaking News: Hardship Distributions Becoming Even Less of a Hardship Than Previously Expected

DWC | 11/13/18

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. 

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What Costs can be Covered Under a Hardship Distribution for Purchase of a Primary Residence?

DWC | 10/30/18

Facts

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.

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