IRS Issues Proposed Amendments to Retirement Plan Hardship Rules

The IRS released proposed amendments in REG-107813-18 to defined contribution retirement plan hardship distribution regulations. These amendments have been drafted to reflect statutory changes contained in the Bipartisan Budget Act of 2018 and the application of hardship rules related to modifications made by the Tax Cuts and Jobs Act.

While the summary introducing these proposed amendments specifically identifies 401(k) plans, it further notes that these amendments “would affect participants in, and beneficiaries of, employers maintaining, and administrators of, plans that contain cash-or-deferred-arrangements, or provide for employee or matching contributions.” This would also include certain 403(b) plans.

The general categories identified in the proposed regulation for changes include the following.

  • Deemed Immediate and Heavy Financial Need
  • Distribution Necessary to Satisfy Financial Need
  • Expanded Sources for Hardship Distributions
  • Relief for Victims of Hurricanes Florence and Michael

The IRS is providing a 60-day comment period as described in the proposed regulation document.

 

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