Do 457(b) plans permit withdrawals for financial hardship?
Plan sponsors have the option of permitting distributions for an “unforeseeable emergency” (i.e., it is not required that plan sponsors permit withdrawals for an “unforeseeable emergency”). The distribution cannot exceed the amount needed to cover the unexpected financial emergency.
Documentation is required for an unforeseeable emergency distribution. Employees who take an unforeseeable emergency distribution cannot repay it to the plan.
Unforeseeable emergency withdrawals are subject to federal (and possibly state) income taxes.
Approving an unforeseeable emergency withdrawal without adequate documentation can cause compliance issues for a plan. Our services include the review and approval of unforeseeable emergency withdrawals to ensure they meet IRS requirements.
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