+1-703-437-8877 info@millermusmar.com Business Clients Portal Online Payment Individual Clients Portal
  • COVID-19
  • Who We Are
    • About Us
    • Affiliations
    • Awards
    • Community
    • SC Advisors
    • Client Testimonials
  • What We Do
    • Accounting
      • Accounting Software Systems
    • Assurance
      • Audit + Audit Approach
      • Review
      • Compilation
      • Audit for Government Contractors
      • Agreed-Upon Procedures
    • Tax
      • Tax Planning
      • Tax Compliance
      • International Taxation
      • Controversy
    • Management Advisory Services
      • Business Valuations
      • Cybersecurity
  • Who We Serve
    • Government Contracting
      • FAR and CAS Compliance
      • Pre-Award Accounting System
      • Audit for Govcon
    • International Services
      • US Expats
      • Non-Resident Aliens
      • Streamline Filing
      • International Tax Service/FIRPTA
    • Medical
    • Nonprofits
    • Texas Charter School
      • What are Charter Schools
      • Accountability Requirements
      • Purpose of the Audit
      • Annual Audit Requirements
      • Auditor Rotation
      • Audit Filing Deadlines
    • AASHTO
  • Resources
    • Newsletters
    • Events
    • Financial Literacy Calculator
  • Careers
    • Employees Testimonials
    • Corporate Culture
    • Employee Benefits
    • The Employee Experience
    • Job Opportunities
  • Contact

Resources

Newsletters

Our regularly updated newsletter provides timely articles to help you achieve your financial goals.

Final regs. loosen 401(k) hardship distribution requirements

The IRS has amended the requirements for hardship distributions from Sec. 401(k) plans (T.D. 9875). The final regulations, issued on Friday, eliminate the requirements that plan participants take loans from the plan to the extent they are available before they are permitted to take a hardship distribution from the plan and that participants may not make new contributions to the plan within six months of the hardship distribution. They also change the casualty loss hardship distribution rules for disaster relief and the rules for determining the amount of plan funds available for distribution, while clarifying the requirement that funds not be available from other sources. Many of these changes were necessitated by amendments to the Code, including changes made by the Bipartisan Budget Act of 2018, P.L. 115-123 (BBA).

The final regulations eliminate the rules in existing Regs. Sec. 1.401(k)-1(d)(3)(iv)(B) (under which the determination of whether a distribution is necessary to satisfy a financial need is based on all the relevant facts and circumstances) and provide one general standard for determining whether a distribution is necessary. A distribution is not treated as necessary to satisfy an employee’s immediate and heavy financial need if the need may be relieved from other resources that are “reasonably available” to the employee (including assets of the employee’s spouse and minor children that are reasonably available to the employee).

Under the new regulations, a distribution is treated as necessary to satisfy an immediate and heavy financial need of an employee only to the extent that:

  • The amount of the distribution is not in excess of the amount required to satisfy the financial need (including any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution);
  • The employee has obtained all other currently available distributions (including distributions of ESOP dividends under Sec. 404(k), but not hardship distributions) under the plan and all other deferred compensation plans, whether qualified or nonqualified, maintained by the employer;
  • The employee has provided the plan administrator with a written representation that he or she has insufficient cash or other liquid assets reasonably available to satisfy the need; and
  • The plan administrator does not have actual knowledge that is contrary to the representation.

The employer may rely on the employee’s representation (unless the employer has actual knowledge to the contrary) that the need cannot reasonably be relieved from other specified resources.

The final regulations also modify the safe-harbor list of expenses in existing Regs. Sec. 1.401(k)-1(d)(3)(iii)(B) for which distributions are deemed to be made on account of an immediate and heavy financial need.

Casualty loss hardship

Because the casualty loss rules were amended by the law known as the Tax Cuts and Jobs Act, P.L.115-97, so that taxpayers only qualify for a casualty loss deduction if they are in a federally declared disaster area, the new regulations provide that only disaster-related expenses and losses of an employee who lived or worked in the disaster area will qualify for the new safe harbor, and the expenses and losses of the employee’s relatives and dependents will not, unlike under the IRS’s disaster relief provisions.

The BBA’s changes to the hardship distribution rules apply to plan years beginning after Dec. 31, 2018. The IRS provided flexible rules for the various effective dates in the regulations because of the necessity for plan amendments to implement the new rules.

— Sally P. Schreiber, Final regs. loosen 401(k) hardship distribution requirements, Journal of Accountancy,[Internet], September 20, 2019

 

Please feel free to contact us to discuss how we can work with you to achieve your goals.
MillerMusmar is committed to the professional standards of
competence, objectivity, and care with every service provided.
Reston, VA Office

MillerMusmar CPAs
2100 Reston Parkway Suite 400
Reston VA 20191
Phone: +1-703-437-8877
Fax: 703-437-8937
info@millermusmar.com

Manassas, VA Office

MillerMusmar CPAs
10502 Crestwood Drive
Manassas, VA 20109
Phone: +1-703-365-8877
Fax: 703-365-8937
info@millermusmar.com

Texas, Office

MillerMusmar CPAs
11908 Yarmouth Lane
Fort Worth, TX 76108
Phone: +1-703-365-8877
Fax: 703-365-8937
info@millermusmar.com

2023 © Copyright All Rights Reserved
CPA Website Design by Thomas Digital
New Location

MillerMusmar CPA’s
2100 Reston Parkway suite 400
Reston VA 20191
Email: info@millermusmar.com
Phone: (703) 437-8877
Fax: (703) 437-8937