The IRS recently amended the rules applicable to hardship distributions from 401(k) and 403(b) plans. The new hardship distribution regulation relaxes some of the restrictions on the availability of hardship distributions and simplifies the related administrative procedures for processing such distributions beginning on January 1, 2020.
The new regulation effectively makes getting hardship distributions easier for participants of 401(k) and 403(b) retirement plans by loosening restrictions that previously may have prevented such distributions. In order to comply with the new regulation, plan sponsors will need to carefully review their current 401(k) and 403(b) plans and related documents, as well as administrative forms, and to amend them where applicable.The regulation changes the rules in several important ways:
Plans will have to be amended to reflect the hardship distribution rules under the new regulations, which are applicable to hardship distributions made on or after January 1, 2020 (although plans are permitted to implement the new rules for distributions beginning in 2019). The deadlines for amendment vary depending on the type of plan maintained by the employer:
In order to ensure compliance with the regulation, plan sponsors should:
Source: JD Supra