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The Bipartisan Budget Act’s Impact on Hardship Distributions

The rules applicable to hardship distributions from qualified plans have been relaxed as a result of the Bipartisan Budget Act, which was passed February 9, 2018.  Effective for plan years beginning January 1, 2018, hardship distributions are modified in the following ways.

 

  • Participants no longer have to exhaust plan loans prior to receiving a hardship distribution.
  • Participants are now able to include qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs) (as well as earnings attributable) when determining the amounts available for hardship distribution.
  • The bill directs the IRS to modify the regulations governing hardship distributions to eliminate the requirement to suspend employee deferrals for six months following a hardship distribution.
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