10 Ways the Budget Act Benefits Retirement Plan Participants

Mar 26, 2018

The two-year budget bill (Bipartisan Budget Act of 2018), signed into law by President Trump in early February, includes several provisions affecting retirement plans. Here is a quick review of the salient provisions now in effect—all of which provide new advantages to plan participants.

Of course, each of these items comes with important caveats. See our recent Regulatory/Legislative Alert for more context.

Impacts on hardship withdrawal rules for plan years beginning after December 31, 2018:


  1. Removes the safe harbor rule requiring a six-month suspension of elective deferrals and employee contributions following a hardship withdrawal

  2. Expands the funds available for a 401(k)-hardship withdrawal to include earnings on elective deferrals, qualified. non-elective contributions (QNECs), and qualified matching contributions (QMACs) including safe harbor contributions.

  3. Eliminates the requirement that a plan participant take any available plan loan before being eligible for a hardship withdrawal.

Impacts on relief available to California wildfire victims:

  1. Permits retirement plan distributions of $100,000 or less, made on or after October 8, 2017 and before January 1, 2019, to participants impacted by the California wildfires.

  2. Exempts these distributions from both the 10% early distribution penalty for distributions prior to age 59½ and the mandatory 20% withholding rule

  3. Spreads taxation of these distributions over three years—and allows participants to roll over all or any portion of these distributions within three years from the date of the transaction.

  4. Allows participants who took hardship distributions to buy a home—but were prevented from doing so by the wildfires---to recontribute the distribution to an eligible retirement plan by July 1.

  5. Increases the amount available as a plan loan to the lesser of $100,000 or 100% of the participant’s vested account for loans issued through the end of this year.

  6. Delays for a full year any loan repayments that would have been due between October 8, 2017 and December 31, 2018.

Relief for participants whose retirement savings have been seized due to a wrongful, premature, or otherwise improper IRS levy:

  1. Permits rollover of the recovered amount into a retirement account up until the following tax deadline date.  This provision is effective for amounts returned to plan participants in tax years beginning after December 31, 2017.

To arrange a consultation about the effects of recent legislation and regulations on your retirement plans, contact your John Hancock representative.

The content of this page is for general information only and is believed to be accurate and reliable as of posting date but may be subject to change. John Hancock does not provide investment, tax, plan design or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

MGTS-P 36332-GE 03/18-36332                                                                                  MGR031918440954

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These articles are not an edorsement of any particular product, service or orginization; nor are they intended to provide financial, tax or legal advice. They are intended to promote awareness and are for educational purposes only.