Skip to Content

Does employer have to approve hardship withdrawal?

When it comes to accessing funds from an employer-sponsored retirement account, individuals often depend on the approval of their employers for certain types of withdrawals. One such withdrawal option is known as a hardship withdrawal, which allows employees to access their retirement funds in case of emergencies or financial difficulties. However, it is important to understand that the approval of a hardship withdrawal rests solely on the discretion of the plan provider. In this blog post, we will explore the process and significance of employer approval for hardship withdrawals, along with alternative options and consequences of denial.

Overview of Hardship Withdrawals

A hardship withdrawal, also known as a hardship distribution, is a method through which employees can access their retirement funds before reaching the age of 59.5 in the event of financial hardship. These withdrawals are allowed under specific circumstances defined by the Internal Revenue Service (IRS) and are subject to the approval of the employer or plan provider.

The purpose of hardship withdrawals is to provide individuals with a safety net during times of financial distress. These may include situations such as medical expenses, the purchase of a primary residence, or the prevention of eviction or foreclosure.

However, it is important to note that not all employees are eligible for hardship withdrawals. The IRS has set certain criteria that individuals must meet to be considered eligible. These criteria may vary depending on the specific retirement plan and the provisions outlined by the plan provider.

Role of Employer in Approving Hardship Withdrawals

As mentioned earlier, the approval of a hardship withdrawal lies within the authority of the plan provider or employer. The plan provider has discretionary power to approve or deny a request based on the individual’s circumstances and adherence to IRS guidelines.

While the employer’s role is crucial in this process, it is important to understand that they are not obligated to approve hardship withdrawals. It is at their discretion to assess the validity of the financial hardship claim and determine whether the withdrawal meets the necessary criteria.

Factors Considered by Employers in Approving Hardship Withdrawals

When reviewing a hardship withdrawal request, employers take various factors into consideration to ensure compliance with IRS guidelines and the authenticity of the financial need. Some of these factors include:

IRS Guidelines:

The employer evaluates whether the request falls within the permissible circumstances defined by the IRS. These circumstances include medical expenses, costs related to the purchase of a primary residence, educational expenses, preventing eviction or foreclosure, funeral expenses, and repairs to a primary residence.

Genuine Financial Need:

Employers assess the claimed financial hardship to determine its legitimacy. They may review the individual’s financial situation, including income, expenses, assets, and liabilities, to ascertain the need for accessing retirement funds.

Review of Supporting Documentation:

Employers typically require supporting documentation to validate the financial hardship claim. This may include medical bills, eviction notices, foreclosure documents, or other relevant evidence to substantiate the need for a hardship withdrawal.

Steps to Request a Hardship Withdrawal

If an individual finds themselves in a genuine financial hardship situation and wishes to request a hardship withdrawal, they need to follow certain steps:

Understanding the Employer’s Process:

It is important to familiarize yourself with the specific procedures and requirements set by your employer or plan provider. This includes understanding the eligibility criteria, specific documentation needed, and any additional steps involved in the approval process.

Completing the Necessary Paperwork:

Most employers or plan providers will have specific forms or paperwork to be completed when requesting a hardship withdrawal. These forms typically require information about the individual, the amount being requested, and the reason for the withdrawal. It is essential to fill out these forms accurately and provide all the required information.

Submitting Supporting Documentation:

Along with the application form, individuals will need to submit supporting documentation to substantiate their hardship claim. It is crucial to gather and provide all necessary documentation as required by the employer or plan provider.

Alternatives to Hardship Withdrawals

While hardship withdrawals provide individuals with a means to access their retirement funds during difficult times, it is generally advisable to explore alternative options first. Some alternatives to consider include:

Loans from Retirement Accounts:

Many retirement plans allow participants to take out loans from their accounts, which can be repaid over time. While this option entails borrowing from one’s own retirement funds, it can provide a more structured repayment plan and avoid certain taxes and penalties associated with outright withdrawals.

Financial Assistance Programs:

Instead of accessing retirement funds, individuals may explore financial assistance programs available through government or nonprofit organizations. These programs can provide temporary relief or support during challenging times.

Budgeting and Financial Planning:

Developing a comprehensive budget and financial plan can help individuals manage their expenses, save for emergencies, and minimize the need to tap into retirement funds. Seeking guidance from a financial advisor can be beneficial in creating a sustainable financial strategy.

Consequences of Employer Denial of a Hardship Withdrawal

In the unfortunate event that an employer denies a hardship withdrawal request, individuals may face significant financial challenges. The denial of a hardship withdrawal could amplify the financial strain and hinder efforts to resolve the hardship situation promptly.

Exploring Alternative Sources of Funds:
In such cases, it is crucial to consider alternative sources of funds. This may include exploring other loan options, seeking financial assistance from family or friends, or exploring additional avenues available to address the financial hardship.


In summary, employer approval plays a pivotal role in the process of obtaining a hardship withdrawal from an employer-sponsored retirement account. While individuals in financial distress have the option to access their retirement funds, they must meet specific criteria and gain approval from the plan provider. It is essential for individuals to understand the guidelines and procedures set by their employers when requesting a hardship withdrawal. Additionally, exploring alternative options and creating a financial plan can help individuals avoid the need for hardship withdrawals and ensure a secure retirement future.


  1. What Employers Should Know About 401(k) Hardship …
  2. Retirement Plans FAQs regarding Hardship Distributions
  3. How to Make a 401(k) Hardship Withdrawal
  4. Hardship Withdrawal – Can this be done without directly …
  5. IRS: Self-Certification Permitted for Hardship Withdrawals …