What Are the Maximum 403B Hardship Withdrawals?

• Public school teachers and some non-profit 501(c) 3 organization employees and may contribute to a 403(b) plan, named after the relevant section of the Internal Revenue code. Certain ordained ministers are also eligible for this retirement plan. Also known as a tax-sheltered annuity plan, 403(b)s can consist of annuity contracts from an insurance company, custodial accounts invested in mutual funds or retirement accounts for church employees, which can be invested in either mutual funds or annuities.

Benefits

• According to the Internal Revenue Service (IRS), benefits of investing in a 403(b) tax-sheltered annuity include tax-free savings on contributions until withdrawals begin. The IRS notes that rules for 403(b) plans are similar to those of the 401(k) plans offered by other employers to their employees.

Withdrawals

• The IRS considers withdrawals from any qualified retirement plan taken before the employee reaches the age of 59 and a half to be "early or premature" distributions. Ten percent tax is levied on such withdrawals, with certain exceptions. These include distributions made within a certain time frame to reduce excess contributions made to the retirement plan. Should the IRS levy a fine on the employee for other tax matters, the 10 percent tax for early withdrawal to pay this money does not apply.

Hardship Withdrawals

• The IRS states that hardship withdrawals for 401(k) and 403(b) retirement plans must be made due to the employee's "immediate and heavy" financial need, and the amount withdrawn must be sufficient to satisfy that need. Such needs may include dependents or spouses. Common needs recognized by the IRS include medical expenses, principal home purchase, tuition and educationally-related fees, funds needed to fore-go eviction or foreclosure on the primary residence, funeral costs and certain expenses for major property damage on the primary home.

Maximum Withdrawals

• Hardship withdrawals are considered unnecessary by the IRS if the employee, spouse or dependents has other financial resources to meet the need. Maximum withdrawals cannot total more than the employee's elective contributions. This does not include plan earnings or matching contributions. Employees cannot make further elective contributions to their 403(b) plan for at least six months after qualifying for the hardship withdrawal.