Hunton Employment & Labor Perspectives

The IRS has issued final regulations amending the hardship distribution rules for qualified retirement plans, including 401(k) and 403(b) plans. The final regulations are substantially similar to the proposed regulations that were issued in November 2018, but provide a few clarifications.  Plans that have been complying with the proposed regulations will satisfy the final regulations.  Below is a summary of the key changes and action items for plan sponsors.

On April 3, 2014, the Internal Revenue Service issued guidance (Revenue Ruling 2014 9) that should make it much easier for qualified plans (including section 403(b) plans) to accept direct rollover contributions from other qualified plans and IRAs.  While qualified plans have long been allowed to accept such rollovers, the new guidance should encourage more plans to accept rollovers by simplifying the process of determining whether a proposed rollover is an “eligible” one which the plan can accept without jeopardizing the plan’s on-going compliance.

On December 11, 2013, the Internal Revenue Service issued Notice 2013-74, which provides additional guidance for 401(k), 403(b) and governmental 457(b) plan sponsors on permitting in-plan Roth conversions (called “rollovers”) of pre-tax amounts.