Effective for plan years beginning after December 31, 2018, the Internal Revenue Service has amended the requirements for taking a hardship distribution from Section 401(k) plans. Previously, a plan participant had to first take a loan from the plan, if available, before they were allowed to take a hardship withdrawal. Also, once a hardship distribution was taken, participants could not make new contributions into the plan for six months following the hardship distribution. This amendment eliminates both of these requirements.
The amended requirements also eliminate the need to determine whether a distribution is necessary to satisfy a financial need based on all the relevant facts and circumstances and now provide only one general standard for determining that the distribution is necessary. This general standard states that the financial need can not be relieved from other resources that are readily available to the employee.
A distribution is now treated as necessary to satisfy an immediate and heavy financial need of an employee only to the extent that:
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Thursday, February 13, 2020
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