Hardships

[rlb64]

I'm looking for something that proves hardships from post-88 earnings are not permitted from custodial account plans. Can someone help?

[Belgarath]

How about 403(b)(7) and (11)? As far as the restriction on the earnings, I believe this was TAMRA1011(A). The following link is on a different subject, but as you will see does have reference, if you read through it, to the TAMRA change. Hopefully the link will work.

http://www.irs.gov/pub/irs-wd/0020048.pdf

P.S. - around page 10, I think.

[joel]

I'm looking for something that proves hardships from post-88 earnings are not permitted from custodial account plans.  Can someone help?

It is the earnings on post December 31, 1988 balances (derived from salary reduction contributions) of 403(b)1 Annuity Contracts that may not be withdrawn for hardship. PL 99-514, section 1123©(1).

[rlb64]

Are you saying post-88 earnings may be withdrawn for hardship from a 403(b)(7)?

[Lori Friedman]

Are you saying post-88 earnings may be withdrawn for hardship from a 403(b)(7)?

Effective 01/01/89, hardship distributions are limited to an employee's salary reduction contributions [i.R.C. Secs. 403(b)(7)(A)(ii) and 403(b)(11)(B)]. Investment earnings are no longer eligible for hardship withdrawal. But, pre-1989 earnings on pre-1989 contributions are grandfathered and can still be withdrawn [PL 100-647, Sec. 1101A©(11)].

[joel]

But, pre-1989 earnings on pre-1989 contributions are grandfathered and can still be withdrawn [PL 100-647, Sec. 1101A©(11)].

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Hardship withdrawals was first added to 403(b)7 Custodial Accounts by the Revenue Act of 1978 and applied to ee and er contributions. So if one wants to make a withdrawal for hardship after 1988 he/she is limited to the account balance as of December 31, 1988 and to ee only contributions made to the account after December 31, 1988. Hardship still must be proven.

When it comes to a 403(b)1 annuity contract one does not need to prove financial hardship in order to be entitled to a pre 1989 amount because all of the triggering events under 403(b) 11, including hardship, did not go into effect until January 1, 1989.

[rlb64]

403(b)(7) says hardships are permitted from contributions pursuant to a salary reduction agreement. 403(b)(11) which only applies to annuity contracts specifically excludes the earnings.

We're new to the 403(b) world, but does this say hardships from earnings attributed to post-88 contribs under a 403(b)(7) are ok?

Our client's document reads like 403(b)(7). We read the IRS audit guidelines and it basically reiterates these code sections.

Is there anything more specific than the language in 403(b)(7)?

[joel]

I did not mean to respond.