You can withdraw money from your 403(b) plan due to a financial hardship, but restrictions vary according to the company or the plan. Employers and plan administrators must follow IRS guidelines for distributions since the plans are federally qualified retirement plans.
The plan must permit hardship distributions because of overwhelming financial needs that have to be addressed immediately. The distributions may also include the financial needs of an employee's spouse, dependent or beneficiary,
according to the IRS. The amount of the withdrawal should meet the financial need.
The plans may differ when it comes to hardship distributions. A plan may have a specific definition of a hardship and limits to the amount that can be distributed from the 403(b) account to the employee.
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Employers might ask you if you have exhausted all of your financial resources, such as trying to get loans or distributions available through another investment plan. The employer could also inquire about possible assets from the spouse or children that could be used for financial needs.
Some plans are specific about how much can be withdrawn and how. A plan might require distributions only be made from salary reduction contributions. A provision could also include suspending you from contributing to the plan and other employer plans for a period of six months after receiving the hardship withdrawal.
Hardship distributions usually allow you to withdraw your contributions but not the earnings on them,
according to Expert Plan. Plans may allow hardship withdrawals to pay medical expenses for the employee or dependents not covered by an insurance plan.
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Plans may allow withdrawals from your 403(b) to meet overdue rent payments or make mortgage payments, especially if it involves possible eviction or foreclosure on a home.
However, some hardship distributions for 403(b) plans allow withdrawals to buy a home. The home must be your principal residence and does not include a second home or vacation home. Hardship distributions could also be available to pay for a year of college tuition and expenses for dependents.
You can learn the particular requirements in your plan by talking to a representative in the human resources department or the plan administrator. Be sure to ask yourself if you have exhausted all of your financial resources before seeking hardship distributions from your 403(b) plan. It could interfere with building up your retirement savings.
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