Employees may be able to dip into their company retirement plan monies to a greater degree given a new law that was passed in 2018.  One key provision was the modification to hardship distribution rules for plan years beginning in 2019.  Below is a summary of the proposed modifications to the hardship distribution rules:

1.)    Elimination of the six-month hardship suspension period.  The requirement that elective deferrals be suspended for six (6) months after a hardship distribution is taken will no longer apply.  You may now take a hardship distribution and continue to make contributions into the plan from your salary.

2.)    Elimination of the loan requirement.  Participants will no longer be required to take any available loans from their retirement account prior to requesting a hardship distribution.  If you just want to take a taxable hardship distribution and not deal with any loan options then you may now do this.

3.)    Earnings on available sources.  Funds available for 401(k) Plan hardship withdrawals will now include earnings that have accumulated on contributions made to the plan.  This should increase the amount available for employees.

4.)    Expansion of sources available for a hardship.  Limitations on pulling company level contributions have been lifted.  Therefore, employees eligible for a hardship distribution may find that there is more money available to them currently to meet their hardship.  Amounts attributable to Qualified Nonelective Contributions (QNECs), Qualified Matching Contributions (QMACs) and any Safe Harbor Contributions may now be withdrawn if the plan document allows for it.

Please check with your retirement plan administrator if you are interested in any of these changes.  They can tell you if your plan document has been updated to allow for these options.

If you have any questions relating to these changes, please contact one of Dermody, Burke & Brown's retirement plan specialists at (315) 471-9171.

The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent law changes, if any.