In-service distributions

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.

  • 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 or $50,000.
  • 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 January 1, 2013 is considered to be an outstanding loan and the participant cannot take another loan.

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.

Under the provisions of the USC Retirement Savings Program and the Keck Medicine of USC 401(k) Retirement Plan, a participant who is employed by USC may apply for a hardship distribution from his/her retirement plan because of one of the following documented immediate and heavy financial needs:

  • Tax deductible medical expense for immediate family that is not paid by insurance (documentation: explanation of benefits and bill from provider)
  • Purchase of principal residence (documentation: signed purchase agreement)
  • Tuition incurred during the next 12 months for post-secondary education for immediate family (documentation: fee bill showing applied scholarships, financial aid and other payments)
  • To prevent eviction or foreclosure on principal residence (documentation: bank foreclosure notice or an unlawful detainer from court)
  • To pay for burial or funeral expenses for immediate family member (documentation: invoice from funeral home and death certificate)
  • Expenses for the repair of damage to principal residence that would qualify for a casualty deduction (documentation: 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 located in an area designated by FEMA for individual assistance with respect to the disaster.

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
  • through reimbursement or compensation by insurance or otherwise,
  • by 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 commercial source (e.g., a bank or credit union) on reasonable commercial terms
  • personal loans

The amount available for a hardship distribution is limited to employee contributions only, not earnings, and cannot exceed the amount needed to pay the documented expenses plus mandated withholding and penalties, if applicable. The distribution will be taxed as ordinary taxable income and an additional 10% IRS penalty will apply if the participant is under age 59½. Notarized spousal consent is required for distributions from the USC Retirement Savings Program.

If you need additional information or want to clarify the documentation that is required to approve your request, email the HR Service Center or call (213) 821-8100.