The Bipartisan Budget Act of 2018 included changes outlined below regarding hardship distributions requirements for most defined contribution plans.
The following changes are mandatory effective January 1, 2020:
| Requirements prior to January 1, 2020 | Requirements as of January 1, 2020 |
| 6-month suspension of contributions after taking a hardship distribution | No suspension of contributions allowed |
| No written representation of financial need required | Participant must represent in writing lack of funds to satisfy financial need |
The following changes include the option for plan administrators to elect alternative requirements effective January 1, 2020:
| Requirements prior to January 1, 2020 | Requirements as of January 1, 2020 |
| Participant must exhaust available plan loans prior to taking a hardship distribution | Participants are not required to take a loan; however, employer may elect to adopt loan-requirement provision |
| Hardship distribution may be taken from elective deferrals only | 401(k) only: Hardship distribution may also be taken from QNECs, QMACs, and earnings on QNECs, QMACs, and elective deferrals; however, employer may elect to restrict sources |
The outlined changes have many details that need to be considered prior to adopting these changes and also require amending plan documents.
For more information, please contact our Albany office at (229) 883-7878 or our Atlanta office at (404) 220-8494.
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