Changes to 403(b) Hardship Withdrawal Regulatory Changes

Did you hear about the legislative changes to 403(b) hardship distributions? NBS has all the information you need to ensure that you have the most up to date information regarding the recent changes to 403(b) hardship distributions.

First, the change is primarily due to the “Tax Cuts and Jobs Act” and the “Bipartisan Budget Act of 2018.”

Effective January 1, 2019, changes to the 403(b) hardship distributions include:

• The 6-month suspension period would no longer be required, with a plan document amendment.
• The requirement to take a loan prior to taking the hardship distribution has also been removed.
• If your plan allows for employer contributions, vested employer contributions will now be included when determining the maximum allowable hardship distribution amount.

By removing these prior requirements, this not only eases the burden in the time of hardship, but allows you, as the participant, to access your 403(b) retirement account, resulting in a qualified distribution.

To expand further, the qualifying distributable events that would allow you to take a 403(b) safe-harbor hardship distribution remain unchanged and include:

• Post-Secondary education (Payment of the next 12 months of postsecondary tuition, such as through a university, college, or technical school; and related education fees for the participant, the participant’s spouse or dependents). Please note, postsecondary education expenses for education already obtained does not qualify.
• Purchase of primary residence (Not including mortgage payments).
• Prevent eviction or foreclosure on a mortgage on the participant’s principal residence.
• Heath expenses (Payment for or to obtain medical or dental care for the participant, the participant’s spouse or dependents, that is not otherwise covered by insurance. Please note, elective procedures, including most orthodontics are not eligible).
• Funeral expenses (Payments for burial or funeral expenses for the employees deceased parent, spouse, children or dependents).
• Damage to principal residence (Certain expenses for the repair of damage to the principal residence that would qualify for the casualty deduction under IRS Code Section 165 and are attributable to a federally declared disaster).

These qualifying events may require proper documentation to be submitted. Your investment provider may require its own paperwork in addition to the NBS hardship distribution form. Once all paperwork has been completed, you may submit all forms to NBS for review and approval.

The Plan and the IRS define certain circumstances that can qualify for a hardship distribution from the Plan if you have exhausted all other sources of assets. As a general rule, documentation should be current, dated, unpaid, and as descriptive as possible.

For more information on what qualifies under the hardship rules, please refer to the NBS hardship form at www.nbsbenefits.com or on the IRS website here.

With NBS as your TPA, your employer’s plan documents will be amended by 2020 for the recent hardship changes. NBS is prepared to help your plan stay in compliance, while allowing for maximum flexibility. Should you have any questions, please refer to the FAQ sheet here or the NBS website here. You may also contact NBS by phone at 1(800)274-0503 option 5.