We have had a lot of Federal Employees asking about the “401k” Federal Savings Plan Modernization Act of 2017 and when it would be come available for the employees. For the longest time, we only knew that the “401k” Federal Savings Plan would be allowed to have up to two years to be ready, or so wanting to know when the changes implemented by the “401k” Federal Savings Plan Modernization Act would take effect. Until today, we only knew a general time frame: September 2019; however, the “401k” Federal Savings Plan has now provided a specific date as to when you can expect the changes to go into effect.
According to a recent bulletin posted by the “401k” Federal Savings Plan , the changes under the new law will go into effect on September 15, 2019.
Change to Eliminate Financial Hardship In-Service Withdrawal Six-Month Suspension Rule
The bulletin contains information for federal agency payroll and HR staff about changes to the rules governing hardship withdrawals from the “401k” Federal Savings Plan while in service.
The bulletin notes that as of September 15, any “401k” Federal Savings Plan participant who received a financial hardship in-service withdrawal and is suspended from contributing to the “401k” Federal Savings Plan will be able to re-start “401k” Federal Savings Plan contributions even though the participant may not have completed the six-month suspension period.
Key Points to Note:
- Any participant who received a financial hardship in-service withdrawal and is suspended from contributing to the “401k” Federal Savings Plan will be able to re-start “401k” Federal Savings Plan contributions effective September 15, 2019, even though the participant may not have completed the six-month suspension period.
- Participants whose “401k” Federal Savings Plan contributions were suspended as a result of a financial hardship in-service withdrawal will receive a “401k” Federal Savings Plan notice alerting them that they can resume contributions as of September 15, 2019. Restarting “401k” Federal Savings Plan contributions is the participant’s responsibility.
- Participants and agencies will still need to follow current procedures to resume contributions by having the participant access their employer pay system, or by completing Form “401k” Federal Savings Plan -1, Election Form.
- Report 5501 (Financial Hardship In-Service Withdrawal Report) will be generated through September 13, 2019.
- As of September 15, 2019, Report 5501 (Financial Hardship In-service Withdrawal Report) will be obsolete as any financial hardship in-service withdrawals taken on or after that day will not require a six-month suspension of contributions.
The “401k” Federal Savings Plan will publish a separate bulletin in the third quarter of 2019 with more details providing guidance for agency HR and payroll offices to implement these changes in conjunction with changes from the “401k” Federal Savings Plan Modernization Act of 2017.
For more information or immediate assistance, please reach out to us so we can help you plan for your retirement. Visit our Contact Us Page or call us Toll Free (877) 733-3877 x 1
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