Felicia Posted July 28, 2004 Posted July 28, 2004 If a 403(b) plan which is not subject to ERISA has a hardship provision, can a person who terminates service take a hardship distribution?
Belgarath Posted July 28, 2004 Posted July 28, 2004 Not sure I see the point. If the person has terminated employment, can't they take a withdrawal anyway?
Felicia Posted July 29, 2004 Author Posted July 29, 2004 A hardship withdrawal would not be subject to the mandatory withholding requirements whereas a distribution upon termination of service would be.
Belgarath Posted July 29, 2004 Posted July 29, 2004 Ah - well then, FWIW, in the absence of specific guidance, my opinion is that you can't take a hardship withdrawal in this situation. Hardship withdrawals are meant to be in-service withdrawals in situations where distribution wouldn't otherwise be permissible. Since a complete withdrawal can be taken upon termination, then I don't see how it could be classified a hardship. But perhaps someone else can come up with a different rationale that would help you out.
joel Posted July 30, 2004 Posted July 30, 2004 Hardship is an in-service triggering event used to make a taxable withdrawal. See: sections 403(b)7 and (b)11. The funds are not eligible for rollover treatment. Termination is a triggering event that allows for a full or partial withdrawal. The tax deferred status of the funds may be preserved by effectuating a rollover.
joel Posted July 31, 2004 Posted July 31, 2004 If a 403(b) plan which is not subject to ERISA has a hardship provision, can a person who terminates service take a hardship distribution? ===================================================== Section 403(b) does not require the establishment of a plan. The employer has no say in its administration because it is a contract between the ee and the investment provider with the er's responsibility being limited to remitting the monthly salary reduction to the provider for investment under directions of the ee. There is no Plan, Plan Document, Summary Plan Description, Trust or Plan Administrator. The assets are owned by the ee. The high priced variable annuity is prevalent in the 403(b) community because it is an individual arrangement and lacks the legal governance required of qualified plans.
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