ERIC Weekly Retirement Newsletter featured a “Retirement Tip from Epstein Becker Green,” authored by Sharon L. Lippett, Member of the Firm in the Employee Benefits practice, in the firm’s New York office.
Following is an excerpt:
If you use the hardship safe harbor definition in your 401(k) plan, take time now to confirm with your record keeper or administrator that requests for plan hardship distributions related to expenses for the repair of damage to an employee’s principal residence still comply with the safe harbor.
The hardship safe harbor definition specifically includes expenses that qualify for the casualty deduction under Section 165(h) of the Code, which was amended by the Tax Cuts and Jobs Act of 2017. Now deductions for casualty under code Section 165(h) from January 1, 2018 through December 31, 2025 are limited to only those casualty expenses attributable to a Federally-declared disaster.
You should confirm whether the administration of your 401(k) plan’s hardship distributions complies with TCJA or determine if you wish to adopt a broader definition of casualty under your 401(k) plan that does not limit principal residence hardship to Federally-declared disasters.