IRS Issues Final Regulations for Hardship Distributions

Matthew P. Chiarello • December 3, 2019

We previously reported on the Bipartisan Budget Act (the “Budget Act”) hardship distribution rule changes for qualified retirement plans. On September 23, 2019, the IRS issued final regulations implementing certain statutory changes to the hardship distributions rules, including those required by the Budget Act. The final regulations closely track the proposed regulations issued in November 2018. The following are some of the more significant changes implemented by the final regulations:

  • Employers must remove the six-month suspension of a participant’s plan contributions following a hardship distribution occurring on or after January 1, 2020.
  • Participants may receive a hardship distribution without first requesting a loan from the plan.  Previously, exhaustion of plan loans was required before a participant could be eligible for a hardship distribution.
  • Employers may allow hardship distributions under a new category of safe harbor expenses for losses incurred by a participant on account of a disaster declared by the Federal Emergency Management Agency (“FEMA”) under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.  The safe harbor is limited to participants who live or work in an area designated by FEMA for assistance with respect to a disaster.
  • Participants are permitted, but are not required, to receive hardship distributions from elective deferrals, qualified non-elective contributions (“QNECs”), qualified matching contributions (“QMACs”), safe harbor contributions and earnings thereon.  Previously, hardship distributions were not permitted from QNECs, QMACs, safe harbor contributions, or earnings on elective deferrals, QNECs, QMACs, and safe harbor contributions.

The final regulations are generally applicable to hardship distributions on or after January 1, 2020, but employers could implement the changes for plan years beginning after December 31, 2018. Employers who have not already implemented the hardship distribution changes should consider amending their qualified retirement plans to address the final regulations by December 31, 2019.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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