Guidelines for Substantiating Hardship Distributions from a 401(k) Plan

Article Excerpt:

According to current guidelines, 401(k) plans may provide that an employee can receive a distribution of his or her elective contributions due to a financial hardship arising from certain events such as medical bills, tuition payments or purchase of a principal residence.

New Substantiation Guidelines

Specifically, by way of a memorandum to Employee Plans (EP) examination employees, the IRS has instructed its personnel to follow a process that is intended to verify that a 401(k) plan hardship distribution was processed on account of  “a deemed immediate and heavy financial need.”