The workplace and other employment consequences of responding to COVID-19 (coronavirus) will raise questions about 401(k) plan administration. Here are some questions that are likely to come up soon.
Can participants modify or terminate their elective contributions?
Yes, by following the plan’s normal rules and procedures. If the normal rules and procedures are not flexible enough for the situation, they can be changed temporarily to provide more flexibility.
Does the coronavirus emergency qualify for a hardship withdrawal?
Perhaps, depending on the circumstance, but probably not yet. The IRS recently added federally-declared disasters to the list of safe harbor financial needs, and many plans have been amended to include this. The president’s declaration of a national emergency, however, is not the same as a declaration of a disaster. The president could make a further declaration. Or, as in the past, the IRS could create a temporary safe harbor for this specific situation. Even without these additional actions by the president or the IRS, the coronavirus could lead to one or more other safe harbor financial needs or, if the plan permits, other immediate and heavy financial needs. This would depend on the terms of the plan, and the facts and circumstances of the particular situation.
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