The answer depends on whether the employer has elected to incorporate a hardship withdrawal provision into the plan. If they have, then you are eligible to apply for a hardship withdrawal. If they have not elected to incorporate this provision, then hardship withdrawals are not allowed from the plan.
If permitted by the employer, a participant may request a hardship withdrawal from their vested account balance if they have an immediate and heavy financial need and lack the resources from which to remedy such need. Hardship withdrawals can not be repaid to the plan. Generally, only the following reasons are valid to obtain a hardship withdrawal: unreimbursed medical expenses for the participant, the participant’s spouse, children and other dependents; the purchase of the participant’s principal residence; payment of tuition and related education expenses for the next 12 months of post-secondary education for the participant, the participant’s spouse, children or other dependents; or the need to prevent the foreclosure or eviction of the participant from their principal residence.
Generally, the following conditions also apply prior to obtaining a hardship withdrawal; the participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the employer; all plans maintained by the employer provide that the participant’s salary deferral contributions will be suspended for 12-months after the receipt of the hardship distribution; the distribution is not in excess of the immediate and heavy financial need although the participant is allowed to “gross up” the distribution for taxes; and all plans maintained by the employer provide than the participant may only make salary deferral contributions for the participant’s taxable year immediately following the taxable year of the hardship distribution not to exceed the applicable IRS annual salary deferral limit in effect for such year less any salary deferral contributions made by the participant in the year he/she received such hardship distribution.
Although the hardship distribution is generally eligible to be rolled over to another tax deferred vehicle, salary deferral amounts received as part of such hardship distribution, together with any amounts which are employer Safe-Harbor contributions, may not be rolled over to another tax deferred vehicle. Generally, the amounts distributed as a hardship withdrawal must have a mandatory 20% withheld for Federal Tax purposes. The participant, if under age 59 ½, must also pay a 10% premature withdrawal penalty when filing their annual tax return. Please see your tax advisor or CPA for further details.
Please check with your plan’s Plan Administrator or your Summary Plan Description for further details. If you believe you are eligible to receive a hardship withdrawal you may access the necessary application and related forms from the FORMS section of our website. You will need to obtain the Client Identification number from your Plan Administrator in order to access these items and may also need to download a free copy of Adobe Acrobat Reader software to view and print these forms. A link to the Adobe website is available in the FORMS section for your convenience.