Understanding Emergency Withdrawals

The Ohio Deferred Compensation Board has established an Unforeseeable Emergency Withdrawal policy based upon Internal Revenue Code Regulations. Because Federal tax laws allow 457(b) program participants to defer taxes on their income, the IRS severely limits the events that qualify as an unforeseeable emergency. In general, the emergency must involve the participant, the participant’s spouse, or a legal dependent (someone claimed on a tax return), and must be the result of events beyond the control of that person.

Many unfortunate events can cause a financial hardship, but not all qualify for an unforeseeable emergency withdrawal under IRS regulations.

To document the need for a withdrawal, the Unforeseeable Emergency Application requires a detailed description of the situation, current financial data including a most recent tax return, and supporting documentation (such as reports from an employer, doctor, insurance, or mortgage company). Only “qualifying events” can be considered, and funds can only be released equal to the amount of documented losses.

When applying for a withdrawal, a participant must stop deferrals for one year to allow time to build savings to meet potential new emergencies.

If you are facing a financial crisis, contact the Service Center to discuss whether your emergency qualifies and what documentation is necessary to release funds.