What's happening
A plan administrator may rely on an employee’s self-certification that they have had a safe harbor event that constitutes a deemed hardship for purposes of taking a hardship withdrawal from a 401(k) plan or a 403(b) plan. The administrator can also rely on the employee’s certification that the distribution is not more than the amount required to satisfy the financial need and that the employee has no alternative means reasonably available to satisfy the financial need. A similar rule applies for purposes of unforeseeable emergency distributions from governmental Section 457(b) plans.

Plan Sponsor considerations

Benefits

  • Streamlined process for participants and reduced processing time
  • Shifts responsibility to participant for documentation retention related to each distribution request
  • Potential to increase plan enrollment and engagement

What to watch out for/downsides

  • Elevated risk of assets leaving the plan, thereby reducing plan health and retirement readiness
  • No repayment of distribution allowed
  • Increased fraud risk as participants might falsely claim emergencies to withdraw retirement funds
  • Potential fraud from bad actors having greater access to participant retirement accounts due to self-certification and no requirement to provide identifying documentation
  • Removes Nationwide as an expert partner in oversight of withdrawal regulations
  • Interpretation of IRS regulations and/or definitions shifts to the employee
  • Future IRS guidance may change how this provision is administered

Participant Considerations

Benefits

  • No waiting period between withdrawals
  • No limit to the number of withdrawals
  • Ease of access to emergency funds
  • Available online via participant website
  • No documentation required to be submitted at the time of the distribution, but must be retained in case of IRS audit

What to watch out for/downsides

  • May impact retirement readiness by allowing greater access to retirement plan accounts originally intended to be long-term investment vehicles​
  • Participant responsible for keeping required documentation in case of IRS audit​
  • Employees must still provide written representation that they have insufficient cash or liquid assets to reasonably satisfy the need
  • Employee misunderstanding of Financial Hardship and Unforeseeable Emergency rules may lead to a nonqualified distribution, subjecting themselves to potential penalties​
  • No waiver of 10% early withdrawal penalty
  • No formal repayment program

Frequently asked questions
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As a plan sponsor, if you wish to adopt this provision, you will need to complete the Intent to Adopt form and return it to Nationwide. Your plan will need a formal amendment for these provisions by the applicable deadline: December 31, 2029, for governmental plans, and December 31, 2026, for ERISA plans. If Nationwide manages your plan documents, we will ensure that they are formally updated by the regulatory deadlines. If your plan is on an individually designed plan document, the regulatory deadlines above apply.

Adoption form - Email forms to rpublic@nationwide.com

Only one Emergency Expense Withdrawal is permitted per calendar year. Participants may be able to request a new Emergency Expense Withdrawal as soon as the amount has been repaid, as long as the last Emergency Expense Withdrawal was not taken in the same calendar year.

Participants have two main options to repay an Emergency Expense Withdrawal:​

  1. Payroll Deductions: Participants who are currently contributing will automatically have those contributions count toward the repayment of the withdrawal. Participants who are not currently contributing can restart their contributions. All contributions received through payroll will count toward the annual 402(g) limit on elective deferrals, which is the maximum amount a participant can contribute to their retirement plan each year.​
  2. Check Repayments: Alternately, participants can make repayments by check. These repayments are treated as eligible rollovers and do not count toward the 402(g) limits. This option allows participants to restore their retirement savings without affecting their annual contribution limits.​
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Participants generally have up to 3 years to repay the Emergency Expense Withdrawal to avoid paying income taxes on the amount withdrawn.
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Review and consider whether this optional provision is right for your plan.
Contact your Retirement Specialist with any questions.