Retirement - Loans and Withdrawals

• Loans can be obtained for active employees who are enrolled in a UK 403(b) or 457(b) retirement plan.
• Employees may borrow up to 50% of the balance in their 403(b) or 457(b) account with Fidelity or up to 45% with TIAA-CREF ($50,000 maximum)
• The minimum amount for a loan is $1,000.
• The maximum loan period is five years. The IRS allows up to 10 years for a loan solely to purchase your primary residence. Documentation is required.
• Each retirement carrier may have additional rules related to the type of investments involved or company policies.
• Fees for loan administration charged by the retirement carrier, if applicable, may vary and are the responsibility of the employee.
• Employees who default on their loan will be subject to taxation by the IRS for the entire amount of the loan and penalties, if they are under age 59½.  In addition, future loans can not be obtained for seven years if you have defaulted on a previous retirement plan loan.
• Loans are available from only one retirement carrier (e.g. Fidelity or TIAA-CREF).

Hardship Withdrawals

• Hardship withdrawals are available only after a loan has been obtained first.
• Funds available for hardship withdrawal are limited to amounts equal to 1) employee 5% contributions and 2) voluntary contributions from Fidelity and TIAA-CREF.
• Distribution amounts cannot exceed the need documented. Payments can be "grossed-up" to accommodate the 20% federal tax withholding. No maximum hardship amount.
• The IRS will impose a 10% penalty for early withdrawal if the employee is under age 59½.
• Documentation of need is required for a hardship withdrawal and must be submitted to the Employee Benefits Office before the withdrawal is approved.
• Hardship withdrawals are available under the IRS guidelines for:
  • Medical expenses for the employee, employee's spouse or dependents that exceed 7.5% of the Adjusted Gross Income;
  • Purchase of the employee's principal residence
  • Post secondary education for the next semester or quarter for the employee, spouse, or dependent.
  • Payments needed to prevent eviction or foreclosure.
  • Funeral expenses for a spouse or dependent.