Can I access money from profit sharing if I'm having financial difficulties?
I was recently told that I had a specified amount of money in my company's profit sharing plan and that I'd have access to it when I leave the company. Currently, I am having financial difficulties. Could my company allow me to withdraw on those funds to help with my financial burden?
- Robert SLv 61 decade agoBest Answer
Companies may use any number of different formulas to calculate the distribution of profits to their employees and establish a variety of rules and regulations regarding eligibility.
To avoid immediate taxation, companies are allowed by the Internal Revenue Service (IRS) to set up qualified deferred profit-sharing plans. Under a deferred plan, profit-sharing distributions are held in individual accounts for each employee. Employees are not allowed to withdraw from their profit-sharing accounts except under certain, well-defined conditions. As long as employees do not have easy access to the funds, money in the accounts is not taxed and may earn tax-deferred interest.
In order for a deferred profit-sharing plan to gain qualified status from the IRS, it is important that funds in employee accounts not be readily accessible to employees. Establishing a vesting period is one way to limit access; employees have rights to the funds in their accounts only when they become partially or fully vested. Another way to limit access is to establish strict rules for making payments from employees accounts, such as upon retirement, death, permanent disability, or termination of employment. Less strict rules may allow for withdrawals under certain conditions, such as financial hardship or medical emergencies. Nevertheless, whatever rules a company may adopt for its profit-sharing plan, such rules are subject to IRS approval and must meet IRS guidelines.
You will have to check with your employer to determine if you qualify to withdraw.