ICMA 457: Emergency Withdrawal Packet
Unforeseeable emergencies within a Section 457 deferred compensation plan are very strictly defined by Internal Revenue Code provisions. Deferred compensation is for retirement purposes. Its tax-deferred privileges are granted because funds are not readily available to the participant. A plan not operating in compliance with the Code and IRS regulations is at risk of being deemed ineligible, with all plan assets immediately taxed. ICMA-RC assists with the compliance status of emergency withdrawal requests to protect the tax-deferred status of the assets in your employer’s plan. An unforeseeable emergency is defined as a severe financial hardship created by: sudden and unexpected illness or accident to you or your dependents; loss of, or damage to, your property due to an accident, disaster, destruction or theft; or other similar, equally severe and unforeseeable circumstances beyond your control. Assets in your deferred compensation account must represent a last resort. The emergency situation must be one that cannot be relieved through insurance reimbursement, cash in savings accounts and credit unions, cash value of life insurance or the liquidation of other assets, a loan from your deferred compensation account, or ceasing contributions.