Sometimes UTSaver participants may find themselves with unexpected expenses. While it is never a good idea to access retirement funds prior to actual retirement, the UTSaver TSA 403(b) and the UTSaver DCP 457(b) plans feature several options for participants in need to access their qualified dollars prior to age 59 ½ or retirement. These include:
Before taking any type of withdrawal from your retirement plans, consider lowering or stopping your contributions, look at loan options, or explore other means available to you.
Loans
If you are actively employed, you can take a loan from your UTSaver TSA and/or UTSaver DCP plan with our approved providers.
- $1,000 minimum loan amount, and your account balance is at least $2,000
- Maximum of one-half of your TSA or DCP balance, not to exceed $50,000 in any given 12-month period (between both plans)
- A defaulted loan (meaning you did not pay it back) will disqualify all future loan requests, regardless of plan type or vendor.
Things to Consider When Taking a Loan:
Reduced contributions: Can you afford to pay off the loan and continue making contributions? Taking a loan may limit potential investment growth.
Costs to consider: You’ll have to pay loan fees—both when the loan is taken out and annually on the outstanding balance.
Potentially pay taxes twice: Contributions to the plan may have been made with pre-tax dollars, however loan repayments are paid after-tax. When you withdraw your money at retirement, the money is taxed again. This means your loan repayments may be taxed twice.
Possible penalties: If you default on repaying the loan, you’ll owe income tax on the balance and if you’re under 59½, you’ll also owe a 10% early-withdrawal penalty. Then you will never be eligible for another loan from either of the UTSaver plans.
Hardship and Unforeseeable Emergency Distribution Requests
If you do not have a loan available and you are experiencing an emergency that cannot be resolved by stopping your contributions or any other means available, you may be eligible for a hardship or unforeseeable emergency distribution. Qualified expenses vary by plan, but may include:
For TSA Hardships
- Medical expenses for the participant, spouse, or dependent not covered by insurance
- Costs directly related to the purchase of a principal resident for the participant (excluding mortgage payments)
- Payment of tuition, related education fees, and room and board for up to the next 12 months of post-secondary education for participant, spouse, children, or dependents
- Payments necessary to prevent eviction of participant from participant’s principal residence or foreclosure on mortgage of that residence
- Payments for burial or funeral expenses for participant’s deceased parent, spouse, children, or dependents
- Expenses for repair of damage to principal residence caused by a declared disaster not covered by insurance
For DCP Unforeseeable Emergencies
- Expenses for sudden and unexpected illness or accident of participant, spouse, or dependent not covered by insurance
- Funeral expenses of the participant’s spouse or dependent
- Expenses for repair of damage to principal residence caused by a declared disaster not covered by insurance
- Other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the participant’s control
Things to Consider Before A Hardship or Unforeseeable Emergency
Irreversible Action: Unlike a UTSaver loan, you cannot pay back a hardship or unforeseeable withdrawal, permanently reducing your retirement nest egg and losing potential future growth.
Tax and Penalty Consequences: The withdrawn amount is taxed as ordinary income and, if you are under 59½, you may owe an additional 10% penalty, though some exceptions apply. Withholding 20% for taxes is standard, often requiring a larger withdrawal to meet your actual need.
Strict Eligibility Criteria: You must prove an immediate financial need, such as preventing eviction, medical expenses, or funeral expenses. The UTSaver plans require supporting documentation (i.e., current outstanding bills showing amounts due and, if applicable, proof the claim was submitted to your insurance company) as well as a certification of need.
Alternatives May Exist: Explore a plan loan, lowering, or even stopping your contributions before taking a withdrawal. If a UTSaver loan is paid off, the transaction is neither taxed nor penalized.
Reduced Future Compounding: According to industry experts, taking out even a $10,000 hardship withdrawal in your 30s can reduce your retirement savings by over $100,000, assuming a 9.6% annual return.
Qualified Birth and Adoption (QBAD)
Participants in the UTSaver TSA and DCP plans may be eligible for a distribution of up to $5,000 for the first 12-month period from the time of a live birth of a child, finalized legal adoption of a child, or physically or mentally incapable adult other than the participant’s spouse. To qualify for this distribution, a participant needs to provide documentation of the live birth or adoption with their application.
Age-Based Distributions
- Participants in the TSA and DCP plans, upon reaching age 59 ½, may begin distributions from their accounts at any time, regardless of employment status.
- Participants of the Optional Retirement Program may begin distributions upon age 70 ½, regardless of employment status
Age based distributions do not require UT approval. Please contact your Provider directly regarding age-based requests.
How to make a request
For loan, hardship/unforeseeable emergency, and QBAD requests: Contact your retirement provider for the appropriate application and follow the provider instructions for submission.
Approved Providers
In addition to the provider applications, for hardship/unforeseeable emergency requests, complete the UTSaver Certification of Need form and submit directly back to the Office of Employee Benefits with the outstanding qualified expense. Please note that only qualified expenses listed above are eligible for a hardship or unforeseeable emergency distributions.
UTSaver Certification of Need
Once your forms and supporting documentation are ready, you must submit the full application packet to the UT Retirement Program at the Office of Employee Benefits:
- Email as a quality PDF attachment (no photos) to utretirement@utsystem.edu
- Fax: 512-579-5016
