With so many people struggling in this bad economy, many are desperate to get money from any source available. Prematurely withdrawing funds from retirement plans before retirement is generally not a good idea as this can have a huge impact on the amount of retirement assets available at retirement. Still many must use the hardship provision just to survive. Some retirement plans may (but are not required to) allow participants to receive hardship distributions. The following sheds light on the hardship withdraw option:
A hardship distribution from a participant’s elective deferrals account can only be made if the distribution meets the following two tests:
Hardship distributions can only be made from accumulated elective deferrals, not from earnings on elective deferrals.
You must contact the plan sponsor or plan administer to determine if the plan allows hardship distributions and request to see a copy of the plan document to know the particular hardship provisions of your plan as drafted by the plan sponsor.
Under IRS rules, a distribution is deemed necessary to satisfy an immediate and heavy financial need of an employee if all of the following requirements are satisfied:
In addition, the IRS rules provide the following “safe harbors” for determining if a hardship distribution is on account of an immediate and heavy financial need:
Generally, employees who take a hardship distribution cannot repay it back to the plan and in most cases are not permitted to contribute to the plan for six months after the withdrawal. A review of the provisions of the plan should be made to know the exact provisions of your particular hardship withdrawal features.
Hardship withdrawals are subject to income taxes and a 10% additional tax on early distributions.
If the plan allows for plan loans, this may be a viable alternative to a hardship distribution. This may be preferable if the participant wants to pay back the amount withdrawn from the plan.
“Steve Fromm was extremely helpful to my wife and myself in preparing the legal documents for our estate planning as well as responding to our federal and state income tax inquires. He was a very good listener as to our needs and structured his replies in everyday language that my wife and I could understand. He asked thought provoking questions and made recommendations to enhance our goals.
He was very timely with both his verbal and written responses. We receive occasional e-mails from him addressing matters which could impact us and we never hesitate to contact him when we have a change with our personal circumstances. His knowledge of the law as well as his practical approach to an issue are very much valued by us.”
Paul Voss, posted May 19, 2011
Hiring Steven was quite possibly the best decision of my life! Steven took the time to hear every single one of my concerns and address them in an extremely clear, concise and thorough manner. He guided me through the notoriously complicated and stressful process of probate with the utmost of compassion and dedication. Thank you Steven!
I highly recommend Steven J. Fromm for all your estate and tax planning needs. He has the most complete and thorough knowledge of current as well as pending federal, state, and local tax codes of any professional that I have ever been involved with. His ability to totally sort out your current financial condition and relate it to a plan to minimize your tax liability and allow you to sleep at night is without equal. He is professional, timely, creative, and an advocate for your needs, whether its personal or business. You can be assured that you will be well taken care of, with cutting edge/ sound financial and tax advice by Steven J. Fromm.
I have always found Steve to be very responsive, accurate and creative in legal matters presented to him. He demonstrates a good business sense. We have collaborated on several highly technical issues over the years. I look forward to our continuing relationship.
Steven has been instrumental in helping my partner and I to create a secure and satisfying estate plan, which meets or exceeds all of our wishes and contains contingencies for everything from medical issues to wealth management and living wills. In this process, Steven has also become a friend. If you need Estate Planning, Tax Advice, a Will or a trust, etc., we highly recommend Steven Fromm, Esquire. He will listen and be sensitive to your unique situation.
Steve is an excellent attorney who has provided help for my family personally for business, tax, and other services for many years. He is extremely knowledgeable and thorough, and is extremely good at explaining legal concepts to me in clear terms understandable to a non-attorney. It is difficult to pick only three attributes above, since Steve’s work meets most if not all of the attributes above.
Steve is an excellent corporate attorney who has a deep understanding of corporate law, taxes and estate planning. He’s been extremely helpful to me in keeping my many companies and business ventures organized, focused and squeaky clean. He’s very strong in estate planning and wealth preservation as well. Finally, his follow through is air tight and utterly dependable.
Steven is a trusted adviser. We depend on him for so many things. He is patient, listens to our needs and makes excellent suggestions. He is extremely talented. We value his advice and have recommended him unhesitatingly to friends and family.
Steve Fromm is a superb lawyer and I highly recommend him! After a terrible experience with a previous lawyer concerning an estate administration, I entered his office feeling very deflated, confused and discouraged. However, I left his office feeling enthusiastic and eager to get down to business. My situation was very unique, I needed his expertise for an array of things and Steve was able to address all of my needs. With a limited timeframe and an extreme amount of obstacles to overcome he worked meticulously, diligently and accomplished extraordinary results. His professionalism is incomparable and I am forever grateful.
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