Self-Certification and Hardship Distributions

Under current law, taxpayers are entitled to take penalty-free hardship distributions from their company-sponsored retirement plans for a variety of reasons, including to pay medical expenses, cover education costs or purchase a primary residence. However, in the past, employers were required to collect and review documentation to prove that the plan participant was truly experiencing a financial hardship. Beginning in 2023, employers are permitted to rely on employee self-certification to prove that the taxpayer had no other source of funds. The employee must provide written documentation stating that the hardship exists, the amount requested does not exceed the amount needed to cover the relevant expenses and that no other source of funds exist. For more information on the rules governing hardship distributions from 401(k)s and 403(b) plans, visit Tax Facts Online. : Q 3798. Note: Q is updated.