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AlbanyConsultant

Hardships allowed from rollovers?

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I have an ERISA 403(b) plan where the plan sponsor wants to allow hardship distributions on all money, including amounts rolled into the plan (as opposed to in-service distributions for any reason). Is there anything in particular that disallows hardships from rollovers in 403(b) plans?

Thanks.

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So the idea is that although the employer could allow distribution of rollover amounts for any reason, it wants to limit such distributions to hardship situations? That is certainly legal. (You can always have a more restrictive distribution policy than the IRS would require.) The real question is an employee relations one. Employees always have the ability to leave their money in a prior employer's plan, or roll distributions from the prior employer's plan to an IRA instead of to your plan. If you impose substantial restrictions on distributions of rollovers from your plan, employees may be substantially less likely to roll money into your plan in the first place. Of course, the employer may or may not care about that.

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