IRS Announces Proposed Hardship Distributions From 401(k) Plans; Comments Due January 14

The Department of the Treasury and Internal Revenue Service (IRS) issued a notice of proposed rulemaking that contains amendments to reflect statutory changes affecting section 401(k) plan hardship distributions of elective contributions, qualified matching contributions, qualified nonelective contributions, and earnings.

The proposed regulations:

  • Modify the safe harbor list of expenses for which distributions are deemed to be made on account of an immediate and heavy financial need,
  • Modify the rules for determining whether a distribution is necessary to satisfy an immediate and heavy financial need,
  • Provide one general standard for determining whether a distribution is necessary, and
  • Permit hardship distributions from section 401(k) plans of elective contributions, QNECs, QMACs, and earnings on these amounts, regardless of when contributed or earned.

Comments are due January 14, 2019.