Hardship withdrawal processing - Empower Retirement

Hardship withdrawal processing

OVERVIEW

A plan may allow a participant to take a hardship withdrawal from their retirement plan account when they experience an immediate and heavy financial need. The plan document defines which of these hardship types is allowed:

? Safe Harbor: Allowable reasons as defined by IRS Safe Harbor Hardship regulations. ? Fact and Circumstance: Allowable circumstances as defined by the plan. NOTE: For 457 plans, Unforeseeable Emergency is treated similarly to a hardship in 401(k) plans, but there are specific differences in Unforeseeable distributions. See Unforeseeable Emergency Whitepaper for additional details specific to Unforeseeable Emergency withdrawals and processing. Participants must submit hardship requests by completing a Hardship Distribution Request form, which they can access online or by contacting a Service Center Representative. Participants must also provide: ? Documentation proving that their request meets the definition of immediate and heavy financial need.

? Notarized spousal consent, if applicable under the plan.

Hardship taxability

Hardship withdrawal amounts are subject to federal and state taxes. The distribution may be subject to an additional 10% penalty for early withdrawal applies unless an exemption applies.

Safe Harbor hardship reasons

Hardship reason

Description

Funeral Expenses

Payments for burial or funeral expenses for the participant's deceased parent, spouse, children, dependent, or named primary beneficiary.

Federally Declared Disaster Expenses and losses (including loss of income) incurred due to a federally declared

Expenses

disaster area designated by the Federal Emergency Management Agency (FEMA).

Eviction or Foreclosure

Money needed to prevent eviction or foreclosure on the mortgage of the participant's principal residence.

Medical Care

Expenses for (or necessary to obtain) medical care for the participant, participant's spouse, dependents, or named primary beneficiary.

Principal Residence Repair Expenses for repair of damage to the participant's principal residence that qualify for casualty deduction.

Hardship Reason

Description

Purchase of Principal Residence

Costs directly related to the purchase of the participant's primary residence, not including mortgage payments.

Post-Secondary Education Expenses

Payment of tuition, related educational fees, and room and board expenses for up to the next 12 months of post-secondary education for the participant, participant's spouse, children, dependents, or named primary beneficiary.

Fact and Circumstance hardship reasons

Plans may allow additional hardship reasons if all surrounding facts and circumstances and additional supporting documentation support an immediate and heavy financial need.

Plans commonly allow all Safe Harbor hardship reasons and may include additional scenarios that would not qualify under Safe Harbor hardships, such as unforeseen illness.

Client provides hardship approval

? The plan administrator or Third Party Administrator (TPA) reviews and approves or rejects all hardship requests.

? The plan administrator or TPA obtains missing information or additional supporting documentation directly from participants.

Empower provides hardship approval

? Empower reviews all hardship requests on behalf of the plan administrator.

? Empower works directly with participants to obtain missing information or additional supporting documentation.

? Not available for plans offering a Qualified Joint & Survivor Annuity (QJSA) payout option.

? Additional recordkeeping services fees may apply.

How it works

Participant ? Obtains a Hardship Distribution Request Form online or by speaking with a Service Center Representative. ? Submits hardship request with appropriate supporting documentation to Empower.

Plan provides hardship approval

Empower ? Reviews the hardship request to ensure it is complete. ? Returns incomplete request to the claimant with an explanation of additional requirements. ? When the request is in good order, forwards it to the plan administrator or TPA for review. ? Upon approval by the plan administrator, processes the hardship request, withholding taxes as applicable. ? Sends funds to participant via elected payment and delivery method. ? Sends applicable tax forms to the participant in January following the year of the hardship withdrawal.

Client ? Reviews supporting documentation submitted with the request to determine if the request meets the plan's hardship requirements. ? Provides any additional information needed for processing, such as vesting information, as applicable. ? Approves or rejects the hardship request.

NOTE: The plan administrator or TPA handles appeals on rejected hardship requests directly with the participant. Empower provides hardship approval Empower

? Reviews hardship request and supporting documentation to determine if the request meets the plan's hardship requirements under Safe Harbor hardship guidelines.

? Works with the participant to collect missing or additional information. ? Returns incomplete request to the participant with an explanation why the hardship cannot be processed. ? Processes the hardship request when it is in good order, withholding taxes as applicable. ? Sends funds to participant via elected payment and delivery method. ? Sends applicable tax forms to the participant in January following the year of the hardship withdrawal. NOTE: The plan administrator or TPA is the final arbitrator for purposes of approving or denying all hardship requests. If the hardship withdrawal is subsequently approved on the appeal, the client instructs Empower how to proceed.

The non-discretionary recordkeeping and administrative services described in this Service Overview are general in nature and reflect the standard service offering. Service descriptions are not specific to any plan provision or administration practice. The recordkeeper may agree to provide an alternate service arrangement, as applicable, if separately requested by the Plan Sponsor.

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