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When can worker take 401(k) hardship distribution?

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in Compensation and Benefits,Human Resources

Q. An employee’s spouse has become disabled. Even though this employee is younger than 59½, he’d like to take a distribution out of his 401(k) account. Can we accommodate him?

A. Distributions are usually allowed when the employee becomes disabled, not a spouse. However, if your 401(k) plan allows for hardship distributions, you may make a distribution to this employee.

Hardship distributions are allowed when an employee, spouse or dependent incurs an immediate and heavy financial need (e.g., disability-related medical expenses). Your plan documents will define precisely what counts as an immediate and heavy financial need.

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