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The Bipartisan Budget Act of 2018 (the "Act") was enacted on February 9, 2018. The provisions of the Act are generally applicable for plan years beginning January 1, 2019, and after.

The most significant provisions addressed in the regulation include:

Hardship rule changes:
  • The optional elimination of the requirement that a plan loan must be taken in advance of a hardship distribution (applicable beginning January 1, 2019).
  • The elimination of the six-month suspension of elective deferrals as a condition of obtaining a hardship distribution (permitted beginning January 1, 2019; required beginning January 1, 2020).
  • Plans may expand the maximum amount available for hardship to include employer matching and employer non-elective contributions (QMACs and QNECs) and earnings (see exceptions applicable to 403(b) plans below).

Implementation considerations

Plan sponsors may want to consider implementing changes by July 1, 2019 to avoid any issue of contribution suspensions carrying over into 2020. For those who adopt the changes on January 1, 2019, plan sponsors may want to consider letting 2018 suspensions run their course.

Unique impact on 403(b) plans

403(b) plans are generally subject to the 401(k) hardship rules, however earnings on 403(b) deferrals, QMACs, QNECs and Safe Harbor contributions from 403(b)(7) custodial accounts will remain ineligible for distribution on account of hardship.

Plan amendments required

Generally, plans will need to be amended no later than December 31, 2019, to reflect the operation of the plans pursuant to the regulations when final.

Retirement plan recordkeepers are taking steps to implement these new rules. Please contact your Gallagher Consultant with questions regarding the impact of the hardship rule changes on your retirement plan.

This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice.