Schreiber, Tax Adviser: Final regs. loosen 401(k) hardship distribution requirements (Sept. 20, 2019)

Sally P. Schreiber has published her article in the Tax Adviser, Final regs. loosen 401(k) hardship distribution requirements (Sept. 20, 2019). Her article begins as follows:

The IRS has amended the requirements for hardship distributions from Sec. 401(k) plans (T.D. 9875). The final regulations, issued on Friday, eliminate the requirements that plan participants take loans from the plan to the extent they are available before they are permitted to take a hardship distribution from the plan and that participants may not make new contributions to the plan within six months of the hardship distribution. They also change the casualty loss hardship distribution rules for disaster relief and the rules for determining the amount of plan funds available for distribution, while clarifying the requirement that funds not be available from other sources. Many of these changes were necessitated by amendments to the Code, including changes made by the Bipartisan Budget Act of 2018, P.L. 115-123 (BBA).

The final regulations eliminate the rules in existing Regs. Sec. 1.401(k)-1(d)(3)(iv)(B) (under which the determination of whether a distribution is necessary to satisfy a financial need is based on all the relevant facts and circumstances) and provide one general standard for determining whether a distribution is necessary. A distribution is not treated as necessary to satisfy an employee’s immediate and heavy financial need if the need may be relieved from other resources that are “reasonably available” to the employee (including assets of the employee’s spouse and minor children that are reasonably available to the employee).

To see full article, click: Final regs. loosen 401(k) hardship distribution requirements

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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