In-service distributions

This page will be updated with 2025 information by Jan. 10, 2025.

In some cases, you may access retirement funds while still at work. Effective March 1, 2021, all employees age 59½ and older may take an in-service distribution from money in their 403(b) match and supplemental accounts, as well as 401(a) USC accounts (subject to investment contract restrictions). Prior to March 1, 2021, tenured faculty were limited to distributions from their supplemental accounts only unless they entered into a phased retirement agreement. All withdrawals are subject to taxes and will be reported as income to the IRS.

Due to the high-volume of in-service distribution requests, please be sure to submit requests 30 days in advance.

Taking out a loan against your retirement account

  • Eligible participants are permitted to have one outstanding loan at a time but there is no limit on the number of loans a participant may initiate. A participant who has account balances in both the USC Retirement Savings Program and the Keck Medicine of USC 401(k) Plan may take a loan from each, providing otherwise eligible.
  • The maximum loan amount is the lesser of 50% of the vested eligible balance minus the highest outstanding loan balance within the past twelve months from all loans.
  • Participants who had two outstanding loans on January 1, 2013, are grandfathered under the previous rules for the duration of the payment period for the two loans. However, a participant with two grandfathered loans is not eligible to apply for another loan until all loans are paid off.
  • There is a seven-day waiting period between the crediting of the final payment of one loan and the approval of the next loan.
  • A loan that has been deemed or defaulted after Jan. 1, 2013, is considered to be an outstanding loan and the participant cannot take another loan until the deemed or defaulted loan plus accrued interest is paid in full.

Know the facts before you borrow

For information about loans, email the HR Service Center or call (213) 821-8100.

To start the process, contact your provider.

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Hardship distributions

A hardship distribution is an IRS allowed withdrawal from your 401(a), 403(b), or 401(k) retirement account made because of an immediate and heavy financial need and limited to the amount necessary to satisfy that financial need.

Conditions to apply for a hardship distribution

Under the provisions of the USC Retirement Savings Program and the Keck Medicine of USC 401(k) Retirement Plan, you may apply for a hardship distribution from your retirement program or plan because of one of the following documented immediate financial needs:

  • Unreimbursed Medical Expense – Tax-deductible medical expense for the employee, the employee’s spouse, dependents or beneficiary that is not paid by insurance (documentation needed: explanation of benefits and bill from provider)
  • Home Purchase – Purchase of principal residence (documentation needed: signed purchase & sale agreement)
  • Post-Secondary Education – Tuition, room & board and book costs for the next 12 months of post-secondary education for  the employee or the employee’s spouse, children, dependents or beneficiary (documentation needed: fee bill showing applied scholarships, financial aid and other payments)
  • Prevent Eviction or Foreclosure – To prevent eviction or foreclosure on principal residence (documentation needed: bank foreclosure notice, or an unlawful detainer from court., A 3-day quit notice is not sufficient)
  • Funeral Expenses – To pay for burial or direct funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary (documentation needed: invoice from funeral home and death certificate)
  • Repairs to Principal Residence – Expenses for the repair of damage to principal residence that would qualify for a casualty deduction (documentation needed: insurance statement and invoice from service provider)
  • Expenses and losses (including loss of income) incurred by you on account of a disaster declared by the Federal Emergency Management Agency (FEMA), provided that your principal residence or principal place of employment at the time of the disaster was in an area designated by FEMA for individual assistance with respect to the disaster.

Notarized spousal consent is required for distributions from the USC Retirement Savings Program.

Documentation

The participant must provide specific and detailed documentation and certify that the amount needed is still owed and cannot be met by:

  • Other distributions from any retirement plan
  • Reimbursement or compensation by insurance or otherwise
  • Reasonable liquidation of assets or those of the spouse or minor children, to the extent such liquidation would not itself cause an immediate and heavy financial need
  • Borrowing from a commercial source (e.g., a bank or credit union) on reasonable commercial terms
  • Personal loans

Amount of distribution

The amount available for a hardship distribution is limited to your contributions only, not earnings, and cannot exceed the amount needed to pay the documented expenses plus mandated withholdings and penalties, if applicable.

The distribution will be taxed as ordinary taxable income with an additional 10% IRS penalty will apply if you are under 59 and a half years of age.

If you need additional information or want to clarify the documentation that is required to approve your request, contact the HR Service Center at uschr@usc.edu or 213-821-8100.

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Qualified Birth or Adoption Distribution

Starting July 1, 2021, the USC Retirement Savings Program and the Keck Medicine of USC 401(k) plans will offer a new feature that allows certain in-service withdrawals to be taken for a Qualified Birth or Adoption Distribution (QBAD). Participants will be eligible to take a QBAD of up to $5,000 per child from their vested account balances, if made within one year following the child’s birth or adoption.

If considering a QBAD distribution, please keep in mind:

  • It is a cash distribution that will be taxed as ordinary income but is exempt from the IRS early distribution penalty.
  • You may re-contribute the withdrawal back into your retirement plan as long as you are still employed at USC. Please contact your investment provider for details.
  • Eligible adoptees include those under age 18, as well as those over age 18 if they are physically or mentally incapable of self-support.
  • Eligible adoptees cannot include a child of your spouse.

To apply for this distribution, please follows these steps:

  1. Contact your investment provider for QBAD request forms.
  2. Complete the forms and obtain notarized spousal consent for distributions from 401(a) and 403(b) plans.
  3. Email the materials as a PDF attachment along with a copy of the child/children’s birth certificate(s) or legal adoption papers, with your name listed, to uschr@usc.edu.
  4. You will receive a confirmation of receipt email with a case number, and if there is any missing information, a USC Benefit Partner will follow up with you directly.
  5. USC will send approval to your investment provider, who will then process your distribution check, and mail or electronically deposit it per your direction.

For additional questions, please contact the USC HR Service Center at uschr@usc.edu or 213-821-8100.