Participants should attend a free Register to attend a Retirement Planning Seminar before submitting a distribution form.
Purchase of Permissive Service Credits
A 457 Plan participant can use his/her 457 Plan account to purchase permissive service credits in a City pension system. The participant will need to contact his/her pension plan directly to obtain the appropriate form to request the purchase of service credits. After receiving documentation from the pension system, the participant will need to submit the documentation along with a 457 Plan In-Service Distribution Form for Purchase of Permissive Service Credits to the Plan's Administrative Office. Payment will be made directly to the pension system.
Unforeseeable Emergency and Hardship Withdrawals
Should a participant experience a financial hardship, he/she can suspend or decrease deferrals to the 457 or 401(k) as that, in itself, might be enough to alleviate the financial burden.
What would qualify a participant for an emergency withdrawal under the 457 Plan?
The 457 Plan’s emergency withdrawal provision is for "unforeseeable emergencies" defined as "...a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a) of the Internal Revenue Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant."
What is NOT an unforeseeable emergency?
(The preceding examples by no means represent a complete list of non-emergencies.)
What would qualify a participant for a hardship withdrawal under the 401(k) Plan?
The 401(k) Plan contains a provision permitting the withdrawal of funds to meet an "immediate and heavy financial need" as that term is defined by the Internal Revenue Code. For example, the need to pay funeral expenses of a family member would constitute an immediate and heavy financial need. However, the purchase of a boat or television would not constitute an immediate and heavy financial need.
The Internal Revenue Code provides that, as a source of funds, the Deferred Compensation Plan is considered by the Internal Revenue Code as a last resort. Therefore, a participant must have used other means of securing funds, such as insurance payments; personal, pension, and MCU loans; and available personal assets before applying for an emergency or hardship withdrawal from the Plan.
How does a participant apply for an emergency or hardship withdrawal from the Plan?
To apply for an emergency or hardship withdrawal from the Plan, a participant must submit a hardship application to the Deferred Compensation Plan with the following documentation:
• A copy of last year’s tax return and Form W-2
• Signed and notarized application
• Copies of MCU, pension and bank loan approvals/denials
• Documentation of the unforeseeable emergency or the immediate and heavy financial need
• Most recent paystub
These documents must be delivered to the Plan’s Administrative Office for preliminary review and presented to the Board for final review. Applications cannot be submitted to the Board without full documentation.
The Deferred Compensation Board reviews emergency withdrawal applications on a case-by-case basis. The Board meets each month and, using the criteria set forth by the IRS, determines which circumstances qualify for a withdrawal. If a case is approved, the applicant is granted that portion of his account that is needed to meet the emergency, as determined by the Board.
The participant continues to remain a member of the Plan after obtaining an emergency or hardship withdrawal and the remainder of his/her account continues to participate in the Plan's investment options. If the participant has a remaining account balance, he/she will continue to receive quarterly statements and newsletters, and be charged the administrative fee.
457 Plan Small Account Withdrawal
A participant may receive a distribution from the 457 Plan prior to separation from City service only if all of the following criteria are met:
Every January, the Plan identifies those participants who meet the criteria for a 457 Plan small account withdrawal. A letter is automatically sent to these participants notifying them that, if they so request, their account can be distributed to them in a lump sum.
After obtaining a small account withdrawal, the participant does not remain a member of the 457 Plan. However, the employee may rejoin the 457 Plan at any time.