Get Ready for 401(k) Hardship Self-Certification – NRECA Employee Benefits Weekly

A new 401(k) Pension Plan hardship withdrawal form is now available online. The updated form reflects new rules under the SECURE 2.0 Act that permit participants to self-certify that:

Their requested hardship withdrawal falls under one of the seven permissible “safe harbor” categories defined by the Internal Revenue Service (IRS),
The amount requested is no more than the amount required to satisfy the resulting immediate and heavy financial need, and
They have no alternative means reasonably available to satisfy the financial need.

Because of this change:

Participants don’t need to include supporting documentation with their hardship withdrawal form; instead, they must retain the original documentation for their tax records.
Benefits administrators and NRECA no longer need to review documentation to ensure that the participant’s request meets IRS hardship guidelines. However, benefits administrators will still need to sign the form before it is sent to NRECA for processing.
On the request form, participants must self-certify that their request meets the hardship withdrawal requirements described in the application package.

These parts of the hardship distribution request process haven’t changed:

Employees must still take all available plan withdrawals (including voluntary employee contributions and quasi-retirement payments) and loans before requesting a hardship withdrawal.
Disabled participants must have been on disability for fewer than 26 weeks.
Hardship applications must contain all required signatures, including a notarized spousal signature when required.

If a request is not in good order for one of the above reasons, NRECA will continue to send a letter of explanation to BA indicating the reason the hardship could not be processed.

Before signing a participant’s hardship withdrawal form, BAs should help verify eligibility using the 401(k) Pension Plan Hardship Distribution Eligibility Checklist. Encourage participants to read the What You Need to Know About Hardship Withdrawals brochure and to consult their personal tax advisor before deciding whether to apply for a hardship distribution. If you have questions about hardships withdrawals, check the Hardship Withdrawal page of the BA Guide or contact your field representative. Participants with hardship questions should contact the Member Contact Center at 866.673.2299 or contactcenter@nreca.coop.