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Hardship Withdrawals

The Bipartisan Budget Act of 2018 (the ?Ç£Budget Act?Ç¥) contains changes that will impact 401(k) plans that offer hardship withdrawals. Effective January 1, 2019, the following key changes to the Internal Revenue Code?ÇÖs hardship withdrawal rules become effective: Permissible Contribution Sources Expanded: The contribution sources from which hardship withdrawals are permitted have been expanded to include qualified nonelective contributions (?Ç£QNECs?Ç¥), qualified matching contributions (?Ç£QMACs?Ç¥), 401(k) safe harbor plan contributions, and earnings on such QNECs, QMACs, and employee deferrals (including post-1988 earnings on elective deferrals). Loan Exhaustion Requirement Eliminated: Participants may take a hardship withdrawal without first having to take out all nontaxable loans available under the plan. Six Month Suspension Requirement Eliminated: Plan administrators are no longer required to suspend a participant?ÇÖs elective deferrals for six months following a hardship withdrawal. Although the IRS has not yet issued explanatory guidance regarding these changes, plan sponsors need to decide now how… Continue Reading

Hurricane and Wildfire Relief

The Bipartisan Budget Act of 2018 (the ?Ç£Budget Act?Ç¥) permits qualified wildfire hardship distributions to be made from October 8, 2017 through December 31, 2018 for qualified individuals impacted by the California wildfires. Plans that elected to provide this relief must be amended no later than the last day of the first plan year beginning on or after January 1, 2019 (i.e., by December 31, 2019 for calendar year plans). In Announcements 2017-11 and 2017-13, the IRS issued relief providing for special hurricane hardship distributions from 401(k) plans for individuals who were directly affected by Hurricane Harvey, Hurricane Irma, or Hurricane Maria. For plans that implemented this relief, the deadline to amend plan documents to incorporate this relief is the last day of the first plan year beginning on or after January 1, 2018 (i.e., by December 31, 2018 for calendar year plans). The Disaster Tax Relief and Airport and… Continue Reading

Disability Claims Procedures

New disability benefit claims procedures regulations were issued by the DOL and became applicable to disability benefit claims filed after April 1, 2018. Employers who maintain retirement plans that provide certain disability benefits (i.e., benefits based upon a determination of disability that is made under the plan) must amend the plan?ÇÖs claims procedures by no later than December 31, 2018, to reflect the required changes in disability claims administration. These regulations do not apply to retirement plans that provide disability benefits that are based upon a determination of disability made outside of the plan (e.g., disability determinations made by the Social Security Administration or by the administrator of the employer?ÇÖs long-term disability plan).

Practice Tip: Retirement Plans

As we enter the last quarter of 2018, plan sponsors should ensure that all required plan amendments will be made to their tax-qualified retirement plans by the applicable deadlines and that the plan administrator is prepared for any changes in administrative procedures that will be required as of January 1, 2019. As a practical matter, plans should be amended for any applicable changes as soon as practicable to conform the plan document (and its summary plan description) to match the plan?ÇÖs administration.

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