Hardship/Emergency Withdrawals related to Beneficiaries

Joint Committee on Taxation Technical Explanation of the PPA Subtitle VII, Explanation 6

6. Modifications of rules governing hardships and unforeseen financial emergencies

Present Law

Distributions from a qualified cash or deferred arrangement (a "section 401(k) plan"), a tax-shelter annuity, section 457 plan, or nonqualified deferred compensation plan subject to section 409A may not be made prior to the occurrence of one or more specified events. In the case of a section 401(k) plan or tax-sheltered annuity, one event upon which distribution is permitted is the case of a hardship. Similarly, distributions from section 457 plans and nonqualified deferred compensation plans subject to section 409A may be made in the case of an unforeseeable emergency. Under regulations, a hardship or unforeseeable emergency includes a hardship or unforeseeable emergency of a participant's spouse or dependent.

Explanation of Provision

The provision directs the Secretary of the Treasury to revise the rules for determining whether a participant has had a hardship or unforeseeable emergency to provide that if an event would constitute a hardship or unforeseeable emergency under the plan if it occurred with respect to the participant's spouse or dependent, such event shall, to the extent permitted under the plan, constitute a hardship or unforeseeable emergency if it occurs with respect to a beneficiary under the plan. The provision requires that the revised rules be issued within 180 days after the date of enactment.

Effective Date

The provision is effective on the date of enactment.

In addition see IRS Notice 2007-7 Miscellaneous PPA Changes

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