Earlier this year, we provided you information regarding the proposed regulations issued by the Internal Revenue Service (“IRS”) relating to hardship distributions from 401(k) plans. Those proposed regulations reflected recent statutory changes, including changes made by the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act of 2017.
The IRS has recently finalized the regulations. In April 2019, the ABA Retirement Funds Program (“the Program”) took action to implement the changes described in items 1-3 below and is doing so now for item 4. The Program implemented these changes at the Program level, so all plans must follow these hardship distribution rules. In summary:
- The six‐month suspension of employee elective deferrals1 following a 401(k) hardship withdrawal was eliminated for all future hardship withdrawals and will be immediately lifted for any participants whose deferrals were currently suspended as of April 19, 2019.
- The requirement that all available plan loans be taken prior to a 401(k) hardship distribution was eliminated as of April 19, 2019.
- Earnings on employee elective deferrals1 are permitted to be withdrawn for a 401(k) hardship distribution.
- NEW! All employer contribution sources are available for a hardship distribution. Employer contribution sources are referred to as “non-401(k) hardship distributions.
The Program intends to amend the Basic Plan Document to reflect these changes. After the Basic Plan Document is amended, the Program will distribute a copy of the amendment and a Summary of Material Modifications to you.
Feel free to call us at 800.752.6313 or email us at firstname.lastname@example.org with any questions. Please include your six‐digit Program plan number when contacting us.
1 “Employee elective deferrals” include both pre‐tax 401(k) contributions and Roth 401(k) contributions.
Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.