Hardship Withdrawal due to pandemic

Since FEMA declared a state of emergency for all 50 states due to Covid-19 does this mean that all participants of all 401k plans which allow for hardship withdrawals are eligible to take a hardship withdrawal pursuant to the following hardship withdrawal reason?:

"Expenses incurred on account of a federally declared disaster".

Thank you in advance for your guidance.

Maybe this will shed some light on your question     https://www.morganlewis.com/blogs/mlbenebits/2020/03/hardship-withdrawal-amidst-the-covid-19-crisis

Thank you ratherbereading, but I was under the impression that all states qualified as per the following:

https://www.fema.gov/news-release/2020/03/13/covid-19-emergency-declaration

The seventh of the rule’s deemed-need situations is:

(7) Expenses and losses (including loss of income) incurred by the employee on account of a disaster declared by the Federal Emergency Management Agency (FEMA) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Public Law 100-707, provided that the employee’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.

https://www.ecfr.gov/cgi-bin/text-idx?SID=763b40b3d060d08c9089fee171f405d7&mc=true&node=se26.6.1_1401_2k_3_61&rgn=div8

It refers to “an area designated by FEMA for individual assistance[.]”

Hi Peter,

If a participant has suffered a loss of income because their spouse lost their job due to Covid-19, would that participant not meet the criteria for requiring individual assistance in an area designated by FEMA?

Without considering whether the Treasury department’s rule makes sense, it turns on whether the participant’s principal residence or principal place of employment was in a place FEMA designated for FEMA to provide individual assistance.

The needs a plan recognizes for a hardship distribution might be wider than those of the § 401(k) rule’s seven deemed-need situations.

Further, a plan might provide a coronavirus-related distribution.

Thank you, Peter.

23 hours ago, sb0828 said:

Hi Peter,

If a participant has suffered a loss of income because their spouse lost their job due to Covid-19, would that participant not meet the criteria for requiring individual assistance in an area designated by FEMA?

I'm not Peter but I just want to offer up a caution, if the PARTICIPANT suffered a loss of income, they would be a Qualified Individual and thus able to obtain a Coronavirus related loan or distribution (if permitted by the plan).  However, the CARES Act does not currently extend this to the spouse.  Further guidance is needed.

For the hardship withdrawal, not all plans permit hardships for Federally Declared Disasters so a quick document check is in order.

BenefitsLink mavens, here’s a question that follows from Pam Shoup’s pointer to Read the Fabulous Document.

Imagine a plan’s governing document states as the only needs recognized for a hardship distribution the deemed needs as the Treasury’s rule specified them before September 23, 2019.

Does this mean the plan’s administrator must deny a claim for a hardship distribution that would be grounded on a FEMA-declared disaster?