Staying in Plan: Accessing Funds Through Loan/Hardship (Screen 2A-5)

 

The BURP Plan has a set of rules that must be followed when taking a hardship distribution or a loan from the Plan. These rules are described in the BURP’s Summary Plan Description. Here’s a breakdown of the rules:

Hardship Distribution: You may take a hardship distribution for any of the following reasons:

  • Prevent eviction or foreclosure of your primary residence
  • Purchase of a primary residence
  • Post-secondary education expenses for the next 12 months for you, your spouse, dependents or your children
  • Funeral Expenses
  • Medical Expenses not covered by insurance for you, your spouse or dependents
  • Expenses to repair damage or to make improvements to your primary residence

You may only withdraw the amount necessary to meet the specific hardship need and must first use any other resources that you might. It is important to keep in mind that hardship distributions are still subject to an IRS 10% penalty tax and ordinary income tax. You will also be ineligible to contribute to the BURP for the next 6 months. Here are the IRS’ FAQs regarding these hardship distribution rules.
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-hardship-distributions

Loans: You may take a loan from the Plan under the following rules:

  • The maximum loan amount is the lessor of $50,000 or 50% of your account value.
  • The minimum loan amount is $1,000.
  • While an application is necessary for taking a loan, documentation or proof of need for a loan is not necessary.
  • You must repay the loan, plus interest within 5 years (or longer, if the loan is to purchase a primary residence).
  • There is a standard loan set up fee of $35 charged by your selected retirement plan vendor.

Here are the IRS’ FAQs regarding loan rules.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans

 

 

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