Plan Sponsors Ask…

Question: Can you provide details on how SECURE Act 2.0 improved the employee self-certification process for hardship distributions?

Answer: Previously, the Internal Revenue Service permitted self-certification for hardship distributions, but it was the responsibility of the plan to obtain any records or evidence needed to prove compliance if the validity of the distribution was challenged. Therefore, some plan administrators and recordkeepers were hesitant to permit self-certification.

Thanks to SECURE Act 2.0, for plan years beginning on or after December 29, 2022, plan administrators may rely on certification by a participant verifying that they have met the requirements for a 401(k) or 403(b) plan hardship distribution without this extra documentation.

The employee’s written self-certification must state that circumstances for the hardship exist, the amount requested is not more than the amount required to satisfy the financial need, and the employee has no alternative means to satisfy such need. These changes are optional and are effective for calendar year plans now.


Consider TRA's 3(16) Fiduciary Services & Plan Administration

To alleviate the day-to-day administrative burdens of yours or your clients retirement plans.