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Implications Of Changing Hardship Withdrawal Provisions In Plan?

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Greetings,

 

When our 403(b) plan was established back in 2009, the designers of the plan restricted all hardship withdrawal provisions to only two of the IRS safe harbor circumstances: 1) Imminent foreclosure or eviction, and 2) unreimbursed medical expenses.

 

Since then, in 2013, we "froze" our 403(b) plan, allowing anyone participating at the time to continue, but any new participants would be directed to the state 401(k) plan, in which we participate. This also meant anyone who stopped contributions for any reason (including because of hardship withdrawals) couldn't continue again, and would be directed to the state plan if they wanted to subsequently resume optional retirement contributions. Through attrition, the old 403(b) plan would eventually terminate.

 

Many individuals have inquired about hardship withdrawals outside of our limited set of allowed circumstances. We are considering changing the plan to allow the entire set of safe harbor provisions, but because of our freeze and the unusual current state of our plan, we are not sure if there would be any adverse consequences or rules we might be violating in doing so.

 

Can you foresee any complications or issues with us changing our plan to open up hardship withdrawals to all of the safe harbor provisions?

 

Do we need to do any reporting of such a change to external parties, besides the providers and our own grandfathered employees? I figure the IRS doesn't care. Just take it to our board? What else should we consider as we proceed?

 

Thanks for any help and guidance you can provide!

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Hardship withdrawals are an optional feature and a plan can offer any of the provisions or all of them as long as the plan document is clear about it. So changing the provisions shouldn't create any complications with the IRS. You don't need to notify the IRS.

 

While not directly applicable to your question, there is some good information in this article (note it's a 401(k) article, but the provisions are the same as 403(b)).

 

Remember, this forum does not provide legal advice, so you'll want your counsel to review the decision, but this seems like a very minor change.

 

ScottyD

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You have a lot of good links, I'm at war with tiaa, they hung up on me 7x yesterday. A new record! They are rude, repeat party line over and over, and just greedy! I have a terminal illness, and want my money! But NO! Sympathy isn't in their dictionary! Thanks for the links. Susan

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Stevinka54

 

Could you elaborate on the problems you are having with TIAA? Perhaps we can help with our comments and advice.

 

 

Thanks. Hope to hear from you.

 

Tony

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