To qualify for a 401(k) hardship withdrawal due to medical expenses, the expenses must be for unreimbursed medical care for the employee, their spouse, or dependents. This includes expenses like hospital stays, doctor visits, prescription drugs, and dental or vision care. These expenses must exceed 7.5% of your adjusted gross income (AGI) for the previous year. Additionally, the hardship withdrawal must be necessary to pay the expenses and you must have no other reasonable means of getting the funds. You can only withdraw enough to cover the expenses, and the amount withdrawn will be subject to income tax and an additional 10% penalty if you are under 59½ years old.
Medical Expenses Eligible for a 401(k) Hardship Withdrawal
A hardship withdrawal from a 401(k) plan allows you to withdraw funds from your account early without incurring the usual 10% penalty for early withdrawal. One of the eligible reasons for a hardship withdrawal is unreimbursed medical expenses.
To qualify for a medical expense hardship withdrawal, you must meet the following criteria:
- You must have unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).
- The medical expenses must be for you, your spouse, dependents, or a qualifying family member.
- You must have already exhausted all other sources of payment, including health insurance, savings, and any other available financial assistance.
The following types of medical expenses are eligible for a hardship withdrawal:
- Hospital and doctor bills
- Prescription drugs
- Dental and vision care
- Medical supplies and equipment
- Nursing home care
- Long-term care insurance premiums
To request a hardship withdrawal for medical expenses, you must provide your plan administrator with documentation of your expenses, including:
- Medical bills
- Explanations of benefits (EOBs) from your health insurance provider
- Receipts for medical supplies and equipment
- Statements from your doctor or other healthcare provider
The table below summarizes the eligibility requirements for a medical expense hardship withdrawal:
| Requirement | Description |
|---|---|
| Unreimbursed medical expenses | Must exceed 7.5% of your AGI |
| Medical expenses for | You, your spouse, dependents, or qualifying family member |
| Other sources exhausted | Health insurance, savings, and other financial assistance used up |
| Eligible medical expenses | Hospital bills, prescription drugs, medical supplies, etc. |
| Documentation required | Medical bills, EOBs, receipts, doctor’s statements |
Qualifying Medical Expenses for 401(k) Hardship Withdrawals
To qualify for a hardship withdrawal from a 401(k) plan, the expenses must be considered medical expenses under the Internal Revenue Code (IRC) Section 213(d). The IRS defines medical expenses as costs incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.
Eligible medical expenses include:
- Doctor’s fees
- Hospital charges
- Prescription drugs
- Dental and vision care
- Long-term care
Health insurance premiums are not specifically listed as qualifying medical expenses under the IRC. However, the IRS generally allows health insurance premiums to be included as medical expenses if they are paid for medical care.
To qualify for a hardship withdrawal for health insurance premiums, the following requirements must be met:
- The premiums must be paid for medical care for you, your spouse, or your dependents.
- You must have incurred other medical expenses that exceed 7.5% of your adjusted gross income (AGI).
- You must have insufficient other resources to cover the medical expenses.
| Expense | Qualifying |
|---|---|
| Health insurance premiums for major medical coverage | Yes |
| Health insurance premiums for dental and vision coverage | Yes |
| Health insurance premiums for long-term care coverage | Yes |
| Health insurance premiums for Medicare Part B | Yes |
| Health insurance premiums for Medicare Part D | Yes |
| Health insurance premiums for COBRA coverage | Yes |
Medical Expenses That Qualify for a 401(k) Hardship Withdrawal
A 401(k) hardship withdrawal allows you to access funds from your retirement account to cover unforeseen medical expenses. However, not all medical expenses qualify. The following guidelines must be met:
Dental and Vision Care
- Dental and vision expenses are eligible for a hardship withdrawal if:
- The expenses are unreimbursed by insurance or other sources.
- The services are necessary to treat an existing condition.
**Qualifying Expenses**
| Dental | Vision |
|---|---|
| Fillings | Eye exams |
| Crowns | Glasses or contact lenses |
| Root canals | Eye surgery |
Note: Cosmetic procedures are not eligible for a hardship withdrawal.
## Prescriptions and Over-the-Counter Medications
Prescriptions for qualifying medical expenses paid by you, your spouse, or dependents can be included in a 401(k) hardship withdrawal. However, over-the-counter medications generally do not qualify unless they are specifically prescribed by a doctor for a specific medical condition.
**Examples of Qualifying Prescription Expenses**
* Medications prescribed for illnesses such as cancer, diabetes, or heart disease
* Medications prescribed for mental health conditions such as depression or anxiety
* Prescription eyeglasses or contact lenses
* Hearing aids
* Dental work
* Hospital stays
* Surgery
**Examples of Non-Qualifying Over-the-Counter Medications**
* Aspirin
* Ibuprofen
* Cough syrup
* Cold medicine
* Vitamins and supplements
It’s important to note that some over-the-counter medications may be prescribed for specific medical conditions, and in those cases, they may be eligible for a hardship withdrawal.
| Medical Expense | Qualifies for Hardship Withdrawal? |
|---|---|
| Prescription medications | Yes |
| Over-the-counter medications (without a prescription) | No |
| Over-the-counter medications prescribed by a doctor | Yes |
Thanks for sticking with me through this exploration of medical expenses that qualify for a 401k hardship withdrawal. I hope it’s been helpful in navigating this potentially stressful situation. Remember, it’s always wise to consult with a financial advisor or tax professional to assess your specific circumstances and make the best decision for your financial health. In the meantime, if you have any other 401k-related questions, don’t hesitate to pop back in. I’d be happy to lend a helping hand!