The 401(k) and 403(b) experts at NESA Plan Consultants regularly receive questions from plan sponsors, financial advisors, CPAs, and other industry professionals on broad array of topics related to qualified retirement plans. A recent question came from a Benefits Manager at a medium-sized nonprofit organization in West Hollywood, CA regarding suspension of deferrals after a hardship.
Background
Previously we suspended salary deferrals for six (6) months after a participant took a hardship withdrawal. I’m now hearing that there’s a new law that permits participants to continue to make deferrals even after taking a hardship distribution.
Question
Should we suspend employee deferrals after a hardship withdrawal going forward?
Answer
We commend you for staying on top of pension developments. First, without getting into too much details, in 2019, plan sponsors had various options on how to apply the suspension of deferrals. However, the fact of the matter is that thanks to the SECURE Act, passed into law in late Dec. 2019, plan sponsors no longer have to suspend salary deferrals after a participant takes a hardship. You can learn more about the SECURE Act here.
A 12-year veteran in all aspects of workplace retirement plan benefits program, Mizan J. Rahman specializes in the compliance, administration, design, and legal documentation of 401(k), 403(b), and 457(b) plans. Mizan provides high-level, personalized consulting to small and medium-sized businesses and not-for-profit organizations. One of the select few to have been awarded Enrolled Retirement Plan Agent (“ERPA”) by the Internal Revenue Service, Mizan regularly represents clients in front of DOL and IRS during audits.
Oh, Did We Mention We Love Answering Questions?
