Do you qualify for a 403b or 457b distribution?

How do you qualify for a 403b or 457b distribution (withdrawal)?

403b Distributions: 

Retirement plan distributions are restricted by IRS regulations. A participant may not take a distribution of 403(b) plan accumulations without penalty unless they have attained age 59.5 or separated from service in the year in which they turn 55 or older. In most cases, any withdrawals made from a 403(b) account are taxable in full as ordinary income.  The penalty for early withdrawal is 10%.  

457b Distributions: 

Retirement plan distributions are restricted by IRS regulations. Participants may not take a distribution of 457(b) plan accumulations without penalty unless they have separated from service. In most cases, any withdrawals made from a 457(b) account are taxable in full as ordinary income. 

403b Financial Hardship Withdrawals: 

Participants may be able to take a hardship withdrawal in the event of an immediate and heavy financial need. According to IRS Safe Harbor regulations, to be eligible for a hardship withdrawal, a participant must have exhausted all other available financial resources. The participants must also verify and provide evidence, according to IRS Safe Harbor regulations, that the distribution is being taken for one or more of the following reasons:

• eligible medical expenses; the purchase of a principal residence (excluding mortgage payments);
• tuition payments and/or room and board for the next 12 months of post-secondary education for the participant, his/her spouse, or dependents; 
• payments necessary to prevent foreclosure on the mortgage of, or eviction from, a principal residence;
• funeral expenses for a family member;
• or loss or damage as a result of a natural disaster (for example, an earthquake).

457b Unforeseeable Emergency Withdrawals: 

457(b) plans may offer distributions to a participant based on an unforeseeable emergency for:

• an illness or accident of the participant, the participant's beneficiary, or the participant's or beneficiary's spouse or dependents;
• property loss caused by casualty (for example, damage from a natural disaster not covered by homeowner's insurance) of the participant or beneficiary;
• funeral expenses of the participant's spouse or dependent; and
• other similar extraordinary and unforeseeable circumstances resulting from events beyond the control of the participant or his or her beneficiary (for example, imminent foreclosure or eviction from a primary residence, or to pay for medical expenses or prescription drug medication).

The participant seeking the distribution must show that the emergency expenses could not otherwise be covered by insurance, liquidation of the participant's assets, or cessation of deferrals under the plan.

• After receiving an unforeseeable emergency/financial hardship withdrawal, the participant may not make voluntary contributions to an employer-sponsored retirement plan for six months. 

• There is a 10% penalty assessed on hardship withdrawals.  In most instances, hardship withdrawals will not close your account in full. 

• If you believe you are experiencing a qualified hardship please contact your school system's Third Party Administrator directly to ensure that you provide the proper documentation. Here is a list of most of the systems that I work with and links to their third-party administrators.  

Plan Administrators by District

• If you do not qualify for withdrawal at this time, you may qualify for a 403(b)/457b loan.