As provided in the budget act, participants of 401(k) or similar tax-qualified retirement plans may take a hardship distribution
from their account without first exhausting any available loan from the plan.
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
The uniform hardship distribution
has a smaller number of active agents than the exponential case.
Auditors should ask plan trustees if they are aware that the participant took the hardship distribution
. It is possible that the trustees would not have approved that distribution, had they known about it.
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.
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.
They may also qualify for a "hardship distribution
" if their plan offers one.
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.