401(k) Hardship Withdrawals - Made Easier by the 2018 Budget Act

Hardship withdrawals from 401(k) and 403(b) plans will be soon become less restrictive under the provisions of the recently-passed Bipartisan Budget Act of 2018“ (the “Budget Act”).

Under current rules, 401(k) plan participants who experience a “qualifying event" may elect to receive a hardship distribution from their retirement account.  A qualifying event includes (1) eviction or foreclose prevention from a principal residence, (2) the purchase of a primary residence, (3) medical expenses, (4) educational expenses, (5) funeral and burial expenses and (6) certain home repairs due to damages in a declared disaster area.  Additionally, a participant must exhaust all other options for withdrawal within the plan (i.e. loans) prior to being eligible for a hardship withdrawal and can only receive amounts he or she previously contributed to the plan.  Finally, future 401(k) or similar contributions will be suspended for a period of 6 months following the date of the hardship withdrawal. 

Effective for hardship distributions that occur after January 1, 2019, employees will no longer be subject to the 6-month suspension period for contributions.  Also, amounts eligible for withdrawal will be expanded to include earnings, as well as other employer contributions previously made to the plan. Lastly, the legislation would remove the requirement to take a loan before qualifying for a hardship withdrawal.

While the 2018 Budget Act makes hardship withdrawal rules less restrictive and easier for plan sponsors to administer, plans will need to be amended to incorporate the new rules for plan years beginning after December 31, 2018.

For more information, contact Schneider Downs or visit the Our Thoughts On blog.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

SECURE Act vs. RESA
2019 Retirement Plan Limitations
401(k) Plan Sponsors and Participants: Be Aware of Unethical Requests
SEC’s Proposal at a Glance
Weathering Volatile Markets
401(k) Hardship Withdrawals - Made Easier by the 2018 Budget Act

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062