In accordance with Internal Revenue Service (IRS) guidelines [IRC 213(d)], for specific reasons and financial circumstances an eligible employee who has entered into a salary reduction agreement with the Research Foundation (RF) may request a hardship withdrawal. The employee must have funds allocated to TIAA-CREF Group Supplemental Retirement Annuity (GSRA) contract, TIAA-CREF Retirement Annuity (TDA) or a Fidelity Mutual Fund custodial account. The amounts available for hardship withdrawals in these accounts are principal only; accumulations cannot be withdrawn.
A hardship withdrawal is defined as an employee withdrawal of principal funds from his or her TIAA-CREF contracts or a Fidelity account for the purpose of satisfying an immediate and heavy financial need, which cannot be met from other sources. The hardship withdrawal must satisfy two criteria (1) there must be a permissible reason for the withdrawal (see below), and (2) the withdrawal must be necessary to pay the expense (plus taxes). An employee may not repay a hardship distribution to their account.
An active RF employee under the age of 59 ½ with a TIAA-CREF GSRA, TIAA-CREF TDA or Fidelity account is eligible to request a financial hardship withdrawal, provided he or she meets the criteria shown below. The employee must complete required forms to justify the financial hardship and demonstrate inability to obtain funds from other income sources. Employer authorization is required for this distribution.
Note: An employee over the age of 59 ½ can make a withdrawal without using this procedure.
A withdrawal request can be approved only if the withdrawal is for one of the six reasons outlined below. The employee must provide adequate documentation to demonstrate that the withdrawal is permissible for one or more of these reasons.
The distribution made to an employee because of hardship withdrawal is taxable in the year it is received and can be subject to an additional 10 percent Federal income tax penalty. The employee can choose at the time of withdrawal whether or not to have taxes withheld by Fidelity or TIAA-CREF. The employee will receive a 1099R at the end of the year stating the amount of the withdrawal and any taxes withheld to be filed with the employee’s tax return for the year. In order to determine if the hardship is subject to the additional 10 percent penalty, the employee should also complete IRS Form 5329 or consult a tax advisor.
If an eligible employee requests a withdrawal of retirement funds because of financial hardship, operating locations should provide the employee with the following documents:
This document explains to an employee who is eligible to request a hardship withdrawal what criteria must be met before making the request, how to make the request and the tax implications of a hardship distribution.
This document provides evidence of the employee’s financial hardship (e.g. outstanding loans, assets, etc.)
This document indicates the contract or account from which the distribution should be made, states the amount needed and how the funds will be used. In addition, the form provides certification that the amount the employee is withdrawing because of financial hardship does not exceed the amount of his or her financial need. It also stipulates that the employee agrees to the suspension of all contributions to the Optional Retirement Plan for 6 months beginning after the hardship has been approved.
At this time, the employee should also be directed to the investment company, TIAA-CREF or Fidelity, from which they are making the withdrawal so that they can get the forms required for withdrawal.
The employee should return both the RF and investment company forms to the operating location.
The following table describes the hardship withdrawal process:
Step |
Who Is Responsible |
Action |
1 |
Operating Location |
Provide employee with General Information handout and hardship withdrawal forms. |
2 |
Employee |
Complete, sign and return the forms and any documentation to the operating location. |
3 |
Operating Location |
Review the forms to ensure they are completed,signed and dated and review documentation for the following:
|
4 |
RF Central Office |
Upon review of the documentation RF central office either denies or approves the hardship withdrawal. If approved, RF central office will return the signed Affidavit of Financial Hardship Certification including the authorized amount to the campus. At the same time they will stop the current optional retirement contributions. If the hardship is denied, an explanation will be provided to the campus. |
5 |
Operating Location |
Will notify employee of either approval or denial. If approved, direct employee to the appropriate investment company for their required forms. These should be completed with the amount approved by central office. The campus should sign these forms and forward the paperwork to the appropriate investment company for processing. Note: Either the approval page of the Affidavit of Financial Hardship Certification should be attached to the investment company paperwork or the approved amount should be indicated on the investment company paperwork.
|
6 |
TIAA-CREF and Fidelity |
Receive the forms, determine the amount the employee can withdraw based on account balances and send the distribution to the employee. Note: Fidelity can determine the amount before the paperwork is submitted. TIAA-CREF does this at the time of submission. |
7 |
Operating Location |
If the employee requests salary reduction following the 6 month suspension period, a new Salary Reduction Agreement is required. |