Hardship Withdrawals

[Nassau]

If a plan states in the plan document that it intends to follow the safe harbor rules with respect to withdrawals, does the plan document have to include all of the six safe harbor reasons in the document?

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[Guest Sieve]

Yes, unless there is a separate hardship withdrawal procedure which includes them and which is somehow incorporated into the Plan. Remember, though, that if you are talking about an adoption agreement checkbox, those rules no doubt will be in the Basic Plan Document.

[Nassau]

Please look at the IRS website - Retirement Plans FAQs Regarding Hardship Distributions. See the IRS commentary below (2nd paragraph under #1). I would interpret this as allowing plans to specify which of the safe harbor hardship reasons are being used.

1. Under what circumstances can a participant get a hardship distribution from a retirement plan?

A retirement plan may, but is not required to, provide for hardship distributions. Many plans that provide for elective deferrals provide for hardship distributions. Thus, 401(k) plans, 403(b) plans, and 457(b) plans may permit hardship distributions.

If a 401(k) plan provides for hardship distributions, it must provide the specific criteria used to make the determination of hardship. Thus, for example, a plan may provide that a distribution can be made only for medical or funeral expenses, but not for the purchase of a principal residence or for payment of tuition and education expenses. In determining the existence of a need and of the amount necessary to meet the need, the plan must specify and apply nondiscriminatory and objective standards.

(Reg. §1.401(k)-1(d)(3)(i))

The rules for hardship distributions from 403(b) plans are similar to those for hardship distributions from 401(k) plans.

If a 457(b) plan provides for hardship distributions, it must contain specific language defining what constitutes a distribution on account of an "unforeseeable emergency."

(Reg. § 1.457-6©(2))