What alternatives are available to help plan sponsors who may not want to open the floodgates for hardship withdrawals and/or limit them only to those impacted by COVID-19 events?
Rather than relying on the safe harbor hardship events to determine whether the individual has an immediate and heavy need, the employer could amend the plan’s hardship distribution provisions to apply “facts and circumstances” for situations where a participant doesn’t qualify either for a hardship distribution or a new distribution available under the CARES Act (a coronavirus-related distribution). To do this, plans need to be amended by last day of plan year.
Alternatively, the plan could allow only CARES Act distributions and loans, and not allow any other hardship or loan withdrawals.
Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.