The uncertainty of the coronavirus has wreaked havoc on markets, causing unprecedented volatility and financial strains to all Americans. This environment may lead to our Plan Sponsors fielding two commonly asked questions from Deferred Compensation Plan Participants.
1. Can I take a Hardship/Unforeseen emergency withdrawal?
Keep in mind that not all plans have a withdrawal provision, but if they do, below are the Hardship Withdrawal Requirements under 409(A):
- An illness or accident of the participant, the participant’s spouse, or the participant’s dependent
- The loss of the participant’s property due to casualty, including the need to rebuild a home following damages not otherwise covered by homeowner’s insurance
- Similar extraordinary and unforeseeable circumstances arising as a result of events beyond the participant’s or beneficiary’s control
- If plan sponsor approves the hardship withdrawal, distributions paid to the participant are limited to the exact amount needed to cover hardship
2. Can I stop my current salary deferrals during the current year?
Section 409(A) states:
- A participant’s deferral election is irrevocable for each calendar year, therefore no changes allowed
- However, following an unforeseeable emergency/hardship distribution, a participant may cancel his or her future deferral elections
Please contact a member of the Mullin Barens Sanford Financial team if you have any questions about the specifics of your company’s plan.
About Mullin Barens Sanford Financial
Through a powerful combination of independence and experience, Mullin Barens Sanford Financial and Insurance Services (MBS Financial) is a leading consulting firm that assists companies with 409A and other executive benefit needs.
Disclaimer: The materials are designed to convey accurate and authoritative information concerning the subject matter covered. However, they are provided with the understanding that Mullin Barens Sanford does not engage in the practice of law, or give tax, legal or accounting advice. For advice in these areas please consult your appropriate advisors.
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