Expected changes to the rules applicable to governmental retirement plans that were designed to bring these plans more in line with other qualified plans were not enacted, nor were changes designed to relax the retirement plan hardship distribution
Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution
The requirements necessary to take a hardship distribution
are clearly stated in the plan document and in ERISA guidelines.
This violation generally occurs when a participant qualifies for and receives a hardship distribution
, and should have his or her elective pre-tax and after-tax deferrals suspended for the balance of the plan year following the hardship distribution
, but the contributions are not suspended as required.
Before you can take a hardship distribution
, you must have taken other permitted withdrawals and loans from qualifying Company plans.
Answer--Regulations require that a hardship distribution
meet two conditions: (a) the distribution must be necessary in light of immediate and heavy financial needs of the employee, and (b) funds must not be reasonably available from other resources of the employee.
The withdrawals do not have to be repaid, but the employee must pay taxes and any applicable penalties on the hardship distribution
For example, loan and hardship distribution
features may rarely be used by a high-income group and, when used, may require very little administrative time and effort.
For example, the automatic enrollment provisions for 401(k)and 403(b) plans are already in effect, so you may wish to provide hardship distribution
to beneficiaries who are neither spouse nor the the dependent of the plan participant.
distributable amount: Typically an employee's distributable amount, for purposes of a hardship distribution
, is limited to the total of his elective deferrals, less any prior hardship distributions
Currently, a plan may make a financial hardship distribution
only where it is necessary to meet an immediate and heavy financial need of the employee.
In addition, you won't be allowed to make elective contributions into your 401(k) plan for the 12-month period following the hardship distribution