The federal CARES Act recently passed to address financial hardships that might arise as a result of the COVID-19 pandemic.
Part of the act increases the ability to take loans or withdrawals from your retirement savings. Learn more >
- Loans can be obtained for active employees and retirees 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 ($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.
- There is a maximum of three outstanding loans at any time.
- 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, a loan default will prohibit any future loans from your retirement plan.
- Hardship withdrawals are available through TIAA.
- Funds available for hardship withdrawal are limited to amounts originally invested in annuity contracts and annuity invested funds equal to 1) employee 5% contributions and 2) voluntary contributions from TIAA.
- Contributions to mutual funds/custodial accounts at either vendor, transfers to annuity investments, and earnings from investments are not eligible for hardship withdrawals.
- 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 TIAA along with other necessary Hardship paperwork 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.