University of Illinois System

Loan & Hardship Withdrawals

Loans

Participants of the University of Illinois 403(b) plan may be eligible to take a loan from the plan when certain requirements are met. Before requesting a loan from your retirement account, you may wish to consult with a financial professional who can help you decide if this is the best option for your situation or if you should first consider other sources. Below is additional information you should consider:
 

  • Loans must be paid back over time and are subject to both federal tax code and investment company rules and regulations.
  • Maximum loan amount is 50% of your account balance or $50,000, whichever is less.
  • General loans must be repaid within five years and home loans withing 15 years.
  • Payments are made monthly through an automated withdrawal from your personal bank account.
  • You may only have one outstanding loan at a time under all qualified plans (403(b) and 457 plan) of the employer.
  • If a loan is in default, no new loan will be available until the defaulted loan is repaid.
  • A loan is not permitted from Roth (after-tax) accounts.
  • A reasonable processing fee may apply.

See the Loan Process Flow for step by step instructions to request a retirement plan loan.

Hardship Withdrawals

In certain circumstances, you may be eligible to take a hardship withdrawal from the University 403(b) Plan. This type of withdrawal can only be taken because of an immediate and heavy financial need, and it is limited to the amount necessary and can be substantiated to satisfy that financial need. Hardship distributions that do not meet IRS requirements or for which you cannot provide documentation are subject to a penalty.

Review the below considerations, potential consequences and Hardship Withdrawal Guidelines before requesting a hardship withdrawal from the plan.

Hardship Withdrawal Considerations and Consequences:
 

  • There is a limit of one hardship withdrawal per six month period.
  • Hardship withdrawals are not paid back which permanently reduces the amount available to you at retirement.
  • Documentation is not required at the time of submission but you must keep copies of supporting documents in the event the IRS requires you to substantiate your withdrawal.
  • A hardship withdrawal is not permitted from Roth (after-tax) accounts.
  • Reasonable processing fees may apply.
  • Penalties or early distribution taxes may apply to hardship withdrawals that do not meet IRS-defined criteria.

Hardship Withdrawal Guidelines – IRS-defined circumstances:

  • To prevent eviction or foreclosure on your principal residence – Not available for a second home, vacation home, or rental property.
  • Uninsured and unreimbursed medical expenses – Includes eligible out-of-pocket and tax-deductible medical expenses for you, your spouse, child or dependent.
  • Post-secondary education expenses – Includes tuition, educational fees, room and board, or books and supplies for the current semester up to the next 12 months for you, your spouse, child or dependent.
  • Purchase of your principal residence – Includes down payment, closing costs, or title fees, but not mortgage payments and is not available for a second home, vacation house, or rental property.
  • Expenses to repair uninsured and unreimbursed casualty loss damage to your principal residence – Not available for a second home, vacation home, or rental property. A hardship withdrawal may be used for expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under Internal Revenue Code. Section 165 (determined without regard to whether your residence is located in a Federal Emergency Management Agency (FEMA) declared disaster area as described in section 165(h)(5) and whether the loss exceeds 10% of adjusted gross income).
  • Payments for funeral or burial expenses – Only for your parent, spouse, child or dependent.
  • Federal Emergency Management Agency (FEMA) Declared Natural Disaster – A hardship withdrawal may be used for expenses for the repair of damage to your principal residence and/or loss of income that would qualify for the casualty deduction under Internal Revenue Code Section 165 if your residence is located in a Federal Emergency Management Agency (FEMA) declared disaster area. See IRS publication 547 and/or consult with your tax advisor.

See the Hardship Process Flow for step by step instructions to requesting a hardship withdrawal.

Questions?

Contact Fidelity at 800-343-0860.