The Department of the Treasury and the Internal Revenue Service recently released Notice 2019-09 (the “Notice”), which provides interim guidance under Section 4960 of the Internal Revenue Code.

Section 4960 was added to the Internal Revenue Code as part of the tax reform legislation that was enacted on December 22, 2017. Very generally, Section 4960

proskauer benefits brief podcast

In this episode of the Proskauer Benefits Brief, Paul Hamburger co-chair of Proskauer’s Employee Benefits & Executive Compensation Group, and associate Steven Einhorn discuss the recently proposed IRS regulations addressing the hardship withdrawal rules affecting 401(k) and 403(b) plans. We will discuss challenging questions employers and administrators face as they work through the new requirements, which include the elimination of the six-month contribution suspension for participants who take a hardship withdrawal and how many plans will need to be amended as a result of these new proposed regulations.


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The IRS recently issued Notice 2018-95 to provide transition relief to 403(b) plans that erroneously excluded part-time employees from eligibility to make elective deferrals when the employees should have been eligible to participate under the “once-in-always-in” requirement (“OIAI”). Under the OIAI requirement, once an employee is eligible to make elective deferrals, the employee may not be excluded from eligibility for making elective deferrals in any later year on the basis that the employee is a part-time employee. The IRS issued Notice 2018-95 to provide transition relief because many employers that sponsored 403(b) plans did not realize that the OIAI requirement applied to the part-time exclusion.

Last Friday, the IRS issued eagerly-awaited proposed regulations regarding hardship distributions under section 401(k) and 403(b) plans (the “Proposed Regulations”). The Proposed Regulations primarily address hardship distribution issues raised by the Bipartisan Budget Act of 2018 (the “Budget Act”). (For our earlier blog entry summarizing these issues, click here.) At the same time, the Proposed Regulations address related hardship distribution issues implicated by the 2018 Tax Cuts and Jobs Act (the “Tax Act”) and recent disaster relief guidance. Plan sponsors should review the Proposed Regulations carefully. Even before the Proposed Regulations are finalized, plan sponsors will need to consider administrative and plan amendment changes to conform to the new rules.

On Feb. 9, 2018, Congress passed, and the president signed, the Bipartisan Budget Act of 2018 (the “Budget Act”). As we previously discussed here, the Budget Act contains a number of provisions that affect qualified retirement plans.  These changes include expanding the type of funds that can be distributed under Code Section 401(k) in the event of a hardship withdrawal, beginning with plan years commencing after December 31, 2018, to include not only a participant’s elective deferral contributions, but also qualified nonelective contributions, qualified matching contributions, and earnings on each of those three contribution sources.  While this change applies to 401(k) plans, there is uncertainty whether it will apply to 403(b) plans.

On Friday, February 9, 2018, Congress passed, and the President signed, the Bipartisan Budget Act of 2018 (the “Budget Act”). The Budget Act contains a number of provisions that affect qualified retirement plans.  Plan sponsors should consider the impact of the Budget Act on their retirement programs.

  • Hardship Withdrawals. The Budget Act relaxes the