A hardship distribution is a distribution of funds from your 403(b) account due to an immediate and heavy financial need. Seven circumstances are deemed by the IRS to constitute an immediate and heavy financial need:
- Medical expenses for the employee or his/her spouse or dependents
- Costs for the purchase of a principal residence
- Tuition and related educational expenses for the employee or his/her spouse or dependents
- Payments necessary to prevent eviction from or foreclosure on a primary residence
- Burial or funeral expenses for the employee’s parent, spouse, or dependents
- Repair of damage to the employee’s principal residence
- Expenses and losses incurred on account of a FEMA declared disaster
Other requirements particular to hardship distributions are:
- The amount of the hardship distribution cannot exceed the amount of the immediate and heavy financial need.
- Hardship distributions can only be made from employee contributions and qualified employer non-elective and matching contributions made to a non-custodial account.
Your employer has hired U.S. OMNI to authorize hardship distributions from its 403(b) plan. Accordingly, OMNI only approves hardship distributions meeting one of the seven categories and requires supporting documentation. Particular requirements and examples of supporting documentation for each of the categories are listed below.
1. Medical expenses for the employee or his/her spouse or dependents
Expenses must not be covered by insurance. If the participant is not the recipient of the medical care, documentation showing the relationship must be provided (e.g. copy of federal tax return; marriage certificate)
- Medical bill dated within the last 6 months showing the amount due
- Notice from collection agency dated within 6 months
- Estimate of treatment costs from your doctor dated within 6 months
2. Costs for the purchase of a principal residence
Costs do not include mortgage payments
- Purchase contract AND Good Faith Estimate (if applicable).
- Purchase contract must be signed by both buyer and seller.
- Purchase contract must include selling price and property address.
- Closing date on purchase contract must be no more than 30 days ago
3. Tuition and related educational expenses for the employee or his/her spouse or dependents
Educational expenses must be for the next 12 months of post secondary education
- Tuition, room and board and/or meal plan bill not covered by financial aid or loans
- Written estimate of book costs Lease agreement for off campus housing
- Written estimate of projected costs AND course catalog information and fee schedules on educational institution letterhead
- If the employee is not the student, documentation showing the relationship must be provided (e.g. copy of federal tax return; marriage certificate)
4. Payments necessary to prevent eviction from or foreclosure on a primary residence
The eviction date or date for payment must not have passed
- Eviction notice showing the monthly rental amount and amount necessary to prevent eviction
- Notice of delinquency showing the amount of past due rent
- Foreclosure notice from the mortgage company showing the amount that is past due
- Notice from the mortgage company showing the amount past due in mortgage payments and payment deadline to avoid foreclosure
- Court order indicating foreclosure and an amount that is necessary to prevent foreclosure and payment deadline date
- Letter from an attorney indicating the amount necessary to reinstate the mortgage or redeem the property and payment deadline date
- Letter from a landlord on letterhead with landlord's signature, along with lease agreement or landlord's signature notarized
5. Burial or funeral expenses for the employee’s parent, spouse, or dependents
- Documentation demonstrating the relationship must be provided (e.g. copy of death certificate; copy of federal tax return; copy of participant birth certificate )
- Statement from the funeral home showing the related costs and services
- Statement from the cemetery for burial costs
6. Repair of damage to the employee’s principal residence
Expenses must be for the repair of damage caused by an event that is sudden or unexpected. (Home improvements do not qualify)
- Contractors estimate or bill showing the cause of damage and cost of repair and dated within the last 3 months
- Explanation of insurance benefits showing any repairs not covered by insurance
7. Expenses and losses (including loss of income) incurred by the Employee on account of a FEMA declared disaster, provided that the Employee's principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance with respect to the disaster.
- Contractor estimates or bill relating to repairs to residence damage caused by the FEMA disaster.
- Receipts for employee expenses that were incurred because of the FEMA disaster area.
Hardship Requests require completed service provider paperwork along with supporting documentation, and must be accompanied by OMNI’s Hardship Distribution Request Form. Supporting documentation can be scanned and uploaded through the website or faxed to 585-756-5557.