A hardship withdrawal may be taken from your 403(b) account if you experience an immediate financial need based on the following conditions and the amount requested is not more than the amount necessary to satisfy that need. You must exhaust all other reasonable means available to you before resorting to taking the hardship distribution. This includes taking out a loan. However if for instance taking out the loan would disqualify you for the mortgage on the purchase of the primary residence you do not have to do so as that would not be a resource that is reasonably available to satisfy the immediate need.
You may continue to contribute to any deferred compensation plan following the 403(b) hardship withdrawal or a 457 unforeseen emergency distribution. As of 2019 there is no longer a 6 month waiting period for resuming contributions.
You may be subject to an early withdrawal penalty and the distribution will be taxable if taken from a traditional 403(b) or a 457 account. A Roth distribution would not normally be subject to taxation.
Safe harbor financial hardships for the 403(b) Plan:
- medical expenses not reimbursed from other sources for the participant, spouse or participant’s dependents or beneficiaries.
- a casualty loss to the participant’s property not otherwise covered by insurance,
- to prevent imminent foreclosure of or eviction from the participant’s primary residence,
- College tuition for the participant, spouse, beneficiary or dependent
- funeral expenses of a family member (spouse, child, dependent or parent) or a beneficiary,
- The purchase of a primary residence.
An Unforeseen Emergency is a distribution taken from your 457 account due to an unexpected severe financial hardship. Note that a 457 unforeseeable emergency is very different than a 403(b) hardship withdrawal. By its very terms, the emergency must be unexpected and unanticipated. College tuition or the purchase of a new home are neither unexpected, nor unanticipated events and would not be an acceptable reason for a distribution from an eligible 457 plan. The regulations define an unforeseeable emergency to be a severe financial hardship to the participant resulting from at least one of the following:
- a sudden and unexpected illness or accident experienced by the participant or participant’s dependents or beneficiaries.
- a casualty loss to the participant’s property not otherwise covered by insurance,
- imminent foreclosure of or eviction from the participant’s primary residence,
- medical expenses not reimbursed from other sources,
- funeral expenses of a family member or a beneficiary, or
- any other extraordinary AND unforeseeable circumstances that arise as a result of events beyond the participant’s control.
