Receiving Your Benefit
If you Experience a Financial Hardship
The Plan allows for two "partial types of withdrawals before you are eligible to take a retirement or break-in-service distribution of your Annuity Fund benefit:
1. Withdrawals from your rollover account (if you have established one)
2. Hardship Withdrawals
Both active and terminated participants may take withdrawals from their rollover accounts. Active participants and alternate payees under QDROs may take hardship withdrawals. Alternate Payees may also take immediate withdrawals.
If you have established a rollover account, you may withdraw all or any portion of your balance in that account for any reason.
If you do not have a rollover account or it is insufficient and you have an immediate and heavy financial need which meets certain conditions, you may be able to take up to 50 percent of the balance of your Regular Account and/or Deferral Contributions Account (which is limited to deferral contributions and any catch-up contributions only, no interest) as a hardship withdrawal. Here are the details:
Hardship Withdrawals - Conditions
A hardship withdrawal must meet the following conditions:
- MEDICAL EXPENSES/MEDICAL INSURANCE/COBRA PREMIUMS – payment of unreimbursed medical expenses incurred by you, your Spouse or an individual who qualifies as your dependent under specific Internal Revenue Code provisions that would be deductible under IRS rules, including amounts which are necessary to obtain: (i) such medical care, (ii) medical insurance and associated premium payments for up to a maximum of twelve (12) months (assuming all other sources of medical coverage, including any COBRA coverage, have been exhausted, except in very limited situations involving a life-threatening disease where medical coverage is permitted), or (iii) COBRA premium payments for up to a maximum of twelve (12) months. If you are requesting a Hardship Distribution to obtain medical care, and/or for the payment of medical insurance or COBRA premiums, be sure to consider potential increases in such amounts.
- EDUCATIONAL EXPENSES, INCLUDING TUITION AND ROOM & BOARD - for the next twelve (12) months for attendance at an accredited educational institution, including on-line classes, beyond high school by you, your Spouse or an individual who qualifies as your dependent under specific Internal Revenue Code provisions. As educational expenses can increase from semester to semester, or trimester to trimester, if you are requesting a Hardship Distribution under this category please be sure to consider potential increases in such amounts.
- EXPENSES OF PURCHASING A HOME which will be your primary residence, other than mortgage payments. This can include situations where a Participant is purchasing the interest of the Participant's former spouse in such primary residence. Motor vehicles (e.g., mobile homes, campers, etc.) do not qualify as primary residences under this item C.
- EXHAUSTION of any and all unemployment benefits to which you may be entitled, including but not limited to Supplemental Unemployment Benefits from the I.U.O.E. Local No. 478 Health Benefits Fund and benefits from State Unemployment Compensation. Please be aware that you must be unemployed to receive a hardship for the exhaustion of any and all unemployment benefits and the maximum amount which may be withdrawn under this item D is the lesser of: (1) one-half of the balance in your Account(s), or (2) $400 multiplied by the number of weeks until you would again become eligible for State Unemployment Compensation benefits, to a maximum of twenty-six (26) weeks.
- AVOIDANCE of a mortgage foreclosure on your primary residence or avoidance of eviction from a rental property which is your primary residence. This can include situations where statutory rights of redemption are being exercised in a timely manner under state law.
- AVOIDANCE of a repossession of a motor vehicle owned and used by you as your primary mode of transportation to and from your place of employment, or a motor vehicle owned and used by your Spouse as your Spouse's primary mode of transportation to and from your Spouse's place of employment. This can also include situations where statutory rights of redemption are being exercised in a timely manner under state law.
- BURIAL AND/OR FUNERAL EXPENSES - payment of burial and/or funeral expenses in connection with the death of your Spouse or child, or your parent, the parent of your Spouse or an individual who qualifies as your dependent under specific Internal Revenue Code provisions. Due to the gravity of this hardship category, as long as a Participant otherwise meets the Plan's hardship distribution eligibility rules, the one hardship distribution in any twenty-four (24) consecutive month period restriction is disregarded with respect to hardship distributions under this item.
- EXPENSES TO REPAIR DAMAGE TO PRIMARY RESIDENCE – payment of expenses for the repair of damage to your primary residence which would qualify under technical IRS rules (i.e., specific provisions of Internal Revenue Code §165) as a "casualty deduction." Please be aware that normal wear and tear to your primary residence over time does not qualify.
- PAYMENT OF OVERDUE FEDERAL & STATE INCOME TAX – payment of delinquent Federal and/or State Income Taxes owed, including interest and penalties. Please be advised that this type of Hardship Distribution can only be used once in your lifetime.
- PAYMENT OF AMOUNTS IN CONNECTION WITH CERTAIN LEGAL PROCEEDINGS - amounts to repay or reimburse an individual or entity who is the victim of a crime committed by you, your Spouse or an individual claimed as a dependent on your federal income tax return, provided that such amounts are needed to avoid the immediate arrest or incarceration of such individual. Please be advised that this type of Hardship Distribution can only be used once in your lifetime.
REMINDERS: The descriptions above are a brief outline of the Plan's Hardship Distribution rules. IN ALL INSTANCES, THE ACTUAL TERMS OF THE PLAN DOCUMENT WILL CONTROL
Additional Hardship Withdrawal Rules
In connection with any financial hardship, the need must be one you cannot reasonably meet from any other resources available to you. These sources include:
- Reimbursement or compensation by insurance,
- Reasonable liquidation of your assets (or assets of your spouse or minor children)
- Stopping your deferral contributions (if any) to the Plan
- Borrowing money from other individuals (such as relatives)
- Borrowing money from commercial sources on reasonable commercial terms
- The type of withdrawal mentioned above from your rollover account (if any) in the Plan
You must have a combined balance in your regular and deferral contribution accounts before the hardship withdrawal of at least $3,000. If you are married and wish to receive a hardship withdrawal, you must obtain your spouse's written consent and have that consent witnessed in the presence of a notary or plan representative You are permitted to take only one hardship withdrawal in any 24 consecutive month period.
What if my Hardship Withdrawal Request Doesn't Meet the Listed Conditions?
Our Annuity Plan staff understands that in difficult economic times, you and your family may have very real immediate and heavy financial needs, such as paying bills and expenses (electricity, oil, gas, food, etc.), buying needed items for your home (appliances, a furnace, a water heater, furniture, etc.) or paying off high interest credit cards.
Unfortunately, unless your particular request can fall into at least one of the specific hardship conditions outlined above, the Annuity Plan simply cannot process it. The reason for this is that IRS rules only permit a qualified retirement plan like our Annuity Plan to make hardship withdrawals in very limited circumstances. In short, the IRS will not permit the Annuity Plan to serve as a bank account or emergency fund, since its primary purpose is to provide you with retirement benefits.
Amount You May Withdraw
One very basic rule is that any hardship withdrawal is limited to the actual dollar amount you need to satisfy the financial hardship, plus any applicable taxes and penalties (see Taxes and Penalties on Hardship Withdrawals below).
In addition, the Plan provides that you may withdraw a maximum of 50 percent of the combined balance in your regular and deferral contribution accounts, but excluding any interest credited to your deferral contribution account. As a simple example, if you have $10,000 in your regular account, and had never established a deferral contribution account, and you had a hardship of $6,000, you would only be eligible to receive $5,000 as a hardship withdrawal (less any applicable income tax withholding), as this is 50 percent of your balance.
There is another special rule which limits the amount you may receive when your specific hardship request is that you have exhausted all unemployment benefits. In that particular situation, the amount you may withdraw is limited to the lesser of:
- 50 percent of your regular and/or deferral contribution account balances (as determined above), or
- $400 a week times the number of weeks until you will again be eligible for State Unemployment Compensation (to a maximum of 26 weeks).
Payment of Your Hardship Withdrawal
Your hardship withdrawal for any purpose other than post-secondary education expenses or expenses for medical insurance premiums will be paid to you in a single lump sum.
Your hardship withdrawal for any purpose other than post-secondary education expenses or expenses for medical insurance premiums will be paid to you in a single lump sum.
Education withdrawals: Payment for post-secondary education expenses will be made in up to four installments as tuition or related expenses become due. The amount you request in your application should include all expenses anticipated for the upcoming 12-month period with respect to the particular degree or program involved. The date of the first installment will serve as the date of withdrawal for purposes of determining whether you meet the 24-month rule for intervals between hardship withdrawals.
Medical withdrawals: Payments for medical insurance premiums may be made in a lump sum or in installments, depending upon the premium due dates and any nondiscriminatory procedures established by the Trustees.
Any amounts needed to satisfy your hardship withdrawal request will be taken from your investment option(s) in proportion to how your account(s) are divided among them.
Taxes and Penalties on Hardship Withdrawals
Any amount paid to you as a hardship withdrawal will be subject to a 10 percent Federal income tax withholding unless you choose to pay all taxes on the distribution when you file your tax return with the IRS. Subject to the Plan hardship withdrawal limitations discussed earlier, you may plan for that withholding in setting the amount of your request.
For example, if you have $20,000 in your regular account (meaning you could potentially receive a hardship withdrawal for up to $10,000) and you have the appropriate financial hardship of $5,000, you would be permitted to request a distribution of $5,555.55. That way, the Plan would withhold the required 10 percent Federal income tax withholding (which here is $555.55), which will leave you with exactly $5,000 in hand.
You may also include in your request the amounts you will need to pay state or local income taxes, any Federal income tax liability that won't be covered by the 10 percent withholding, and the possible 10 percent penalty for a hardship withdrawal taken before you reach age 59½.
Checklist
You may also include in your request the amounts you will need to pay state or local income taxes, any Federal income tax liability that won't be covered by the 10 percent withholding, and the possible 10 percent penalty for a hardship withdrawal taken before you reach age 59½.
Checklist
- Contact the Fund Office for information on how to apply for a hardship withdrawal and what you will need to supply
- Complete the application form and return it to the Fund Office
When You Retire
Once you retire, you can request the Fund Office forward you an application, should you require a distribution. With the application form, the Fund Office will send you a description of the payment form options.
If you are married and you wish to choose a payment form other than the automatic 50 percent joint-and-survivor annuity, your time frame for doing so is the last 180 days before payments start. Remember that your spouse will need to consent to your rejection of the 50 percent joint-and-survivor annuity and your selection of a different payment form in the presence of a Plan representative or notary public.
If you are not married and you wish to choose a payment form other than the automatic life annuity, your time frame for doing so is the last 180 days before payments start.
Checklist
Checklist
- Call or write to the Fund Office for an application for benefits,
- Consider the Annuity Plan's various distribution options and your financial needs in retirement. You may also wish to consult with a professional advisor,
- Submit your completed application to the Fund Office,
- Allow at least one month for processing. If you wish to utilize the 7-day exception, which essentially allows you to receive a distribution in about 7-10 business days, you and your spouse, if any, will need to complete an appropriate waiver.