November 6, 2024
403(b) Plan and 457(b) Distribution Options
We recognize life is unpredictable.
Life is full of unexpected events, and sometimes, these unforeseen circumstances can create a significant financial strain on your clients. For many families, the hardship withdrawal or unforeseen emergency provision in a 403(b) and 457(b) retirement plan offers a crucial lifeline to cover immediate and heavy financial needs such as medical expenses, eviction prevention, or funeral costs. A recent Vanguard study highlights a growing trend for this provision: a record 3.6% of the 5 million accounts saw an early withdrawal¹.
We recognize life is unpredictable and when the unexpected occurs, the last thing a client needs is the burden of carrier fees or charges. That is why we have the Emergency Access Waver on our current line of Flexible Premium Deferred Annuities and Single Premium Deferred Annuities. We are still the only carrier in the industry with this type of provision!
Your clients can access their eligible policy values for hardship or unforeseen emergency distribution or after separation from service or disability². This waiver is included at no additional charge.
While employed, if your clients encounter certain life events, they may be permitted to withdraw money from their plan to cover the expense associated with hardship. Hardship Distributions may be permitted for the following events:
- Medical expenses not covered by insurance
- Tuition expenses for the next 12 months
- Funeral expenses
- Purchase of primary residence
- Casualty loss to primary residence not covered by insurance
- Prevention of eviction or foreclosure on mortgage
Distributions are taxed as ordinary income, may be subject to the 10% IRS early distribution penalty, and may be subject to policy and/or plan withdrawal charges.
While employed, if your clients encounter certain life events, they may be permitted to withdraw money from their plan to cover the expense associated with unforeseen emergency. Unforeseen Emergency Distributions may be permitted for the following events:
- Medical expenses not covered by insurance
- Funeral expenses
- Casualty loss not covered by insurance
- Prevention of eviction or foreclosure on mortgage
Distributions are taxed as ordinary income and may be subject to policy and/or plan withdrawal charges.
- Wilde, W. and Chambers, A. (2024) Why more Americans are making hardship withdrawals from retirement accounts, PBS.
- The Emergency Access Waiver is available after the first policy year and distributions must be approved by the Plan/Third Party Administrator (TPA). Distribution is subject to IRS taxes and, if applicable, IRS 10% early distribution penalty.
