ErisaGooroo

Unforeseeable Emergency

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Question #1:  Is a participant in a 457(b) top hat plan required to cease deferrals in the 457(b) top hat plan for 6 months after taking an unforeseeable emergency distribution?  The document is silent on this fact so I'm assuming the answer is no.

Question #2:  Client also sponsors a 403(b).  It is my understanding that when a participant takes an unforeseeable emergency distribution from the 457(b) TH, the participant must cease elective deferrals in the 403(b) Plan sponsored by the same employer.  Is this correct?

Any input would be greatly appreciated!

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On Q1, read the plan or agreement to consider which person decides whether a claim sufficiently states an unforeseeable emergency, and how much discretion the person has.

A discretionary decision-maker might consider a non-cessation of deferrals as some evidence suggesting that the claimant might not really need an emergency distribution.

On Q2, read the plan, the forms, the claims procedure, and for a point not resolved by those consider the administrator's discretion.

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An unforeseeable emergency is not the same as a hardship. Thus, a distribution due to unforeseeable emergency does not mean the hardship rules are invoked. However, as noted above, check the terms of your plan documents to make sure you are following its terms. If there is no requirement to stop deferrals in the document, then how will you justify the stopping of deferrals?

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