Our TPA clients may recall that back in late 2018, we announced changes to the financial hardship distribution option for 403(b), 401(k), and Governmental 401(a) Plans. These changes, a result of the Bipartsian Budget Act of 2018, will only impact plans that currently permit hardship distributions as part of their plan provisions. It is important to note that the Budget Act of 2018 specifically cites 401(k) plans, therefore, rule changes with respect to employers sponsoring 403(b) plans are a bit more confusing.
With 403(b) plans not being cited in the Budget Act; consequently, certain rule changes do not technically apply to 403(b) plans. This legislative deficiency relates to making other contribution sources (besides employee deferral contributions) available for hardship distributions. ADMIN has consulted with legal counsel on the issue, and as a result
, we are recommending that clients sponsoring 403(b) plans do not permit other contribution sources to be used for hardship distributions until the Congress enacts a technical correction to fix the issue.
There are other rule changes that will impact how ADMIN administers both 403(b) and 401(k) plans that permit hardship distributions. These changes took effect January 1, 2019. Here is a summary of those changes:
ADMIN has been in communication with our investment provider and record keeping partners. Many of them have previously announced changes to their systems to implement new hardship rules that were passed as part of the Budget Act.
These changes do require updates to the documents of those impacted plans. ADMIN Partners will be reaching out to our existing clients in the next few weeks with the necessary documents to facilitate these updates for your plans. In the meantime, if you have questions or need additional information, please feel free to contact us at (877) 484-4400.