How 401k withdrawals affect weekly ESD benefits - one-time or ongoing reduction?
I'm currently on unemployment and considering taking a lump sum withdrawal from my 401k to cover some unexpected medical bills. I've heard conflicting information about how this would affect my weekly benefits. As I understand it, only my employer's contribution portion (6% match in my case) would count as income for unemployment purposes. What I really need to know is whether this would only reduce my benefits for the single week I report the withdrawal, or if it somehow affects multiple weeks going forward? For example, if I withdraw $5,000 next Tuesday and report it on Sunday when filing my weekly claim, would I just miss benefits for that one week and then return to normal the following week? It seems logical since ESD doesn't ask about your bank balance each week, but I want to be 100% sure before I make this move. Has anyone actually done this while on unemployment? Any firsthand experience would be incredibly helpful!
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Zara Khan
You're mostly right, but there are some important details to understand. For ESD purposes, the EMPLOYER portion of a 401k withdrawal (your 6% match) is considered income in the week you receive it. You'll need to report this when you file your weekly claim. The rest of the withdrawal (your contributions) is not considered income for unemployment. So your benefits would only be reduced or eliminated for that single week, depending on the amount. After that week, your benefits should go back to normal assuming you meet all other requirements. Just make sure to clearly report it as a 401k withdrawal on your weekly claim so it's processed correctly.
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Sean Fitzgerald
•Thank you so much! That's a relief. So I just need to prepare for one week without benefits potentially. Do you know if I need to provide any documentation to ESD about the withdrawal, or just report the employer portion amount when filing my weekly claim?
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MoonlightSonata
i did smething like this last yr during my claim, took out like 10k from my 401k... only affected me for ONE week. but watch out bcuz when i filed my claim that week it got stuck in processing for like 3 weeks b4 they approved it!! so just be prepared for a delay. they might wanna verify the amount or something
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Sean Fitzgerald
•That's really helpful to know! Did they contact you for verification or did it just eventually process through? I'm wondering if I should have documentation ready just in case.
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Mateo Gonzalez
You might want to call ESD directly to confirm how they'll handle it. Their rules can be confusing and sometimes the agents give different answers. I've been trying to reach them for a week about a similar question but can't get through the phone queue.
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Nia Williams
•I had the same issue trying to reach ESD about benefit questions. I discovered Claimyr (claimyr.com) which helped me get through to an ESD agent in about 20 minutes instead of spending days trying. They have a video showing how it works: https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3. It was honestly a lifesaver when I needed clarification on a withdrawal situation similar to yours. The agent confirmed that only the employer-matched portion counted and only for the week I received it.
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Luca Ricci
I WOULD BE CAREFUL!!! When I took money from my retirement account last year, ESD counted it ALL as income and it messed up my benefits for THREE WEEKS!!! Had to file an appeal and everything to get it fixed. They said I "misreported" but I didn't! Make sure you specifically tell them it's a 401k withdrawal and ONLY report the employer match portion. Their system is so broken!!!!
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Aisha Mohammed
•That's not how it's supposed to work according to ESD rules. Only the employer portion should count as income. Sounds like someone at ESD processed your claim incorrectly. I work in HR and have helped several employees navigate this. OP - if you have any issues after reporting, request a formal determination and appeal if necessary. Keep documentation showing the breakdown between your contributions and the employer match.
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Ethan Campbell
Question - wouldn't it be better to take a 401k loan instead of a withdrawal if possible? Then you wouldn't have to report any of it as income. That's what I did during my unemployment last year and it didn't affect my benefits at all. Just thinking there might be a better option...
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Zara Khan
•That's actually a really good point. A 401k loan doesn't count as income for unemployment purposes since you're essentially borrowing your own money and repaying it. It also avoids the early withdrawal penalty if you're under 59½. However, not all 401k plans allow loans while you're separated from employment, so it depends on the specific plan rules.
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Sean Fitzgerald
Thanks everyone for the helpful responses! I just got off the phone with my 401k administrator and unfortunately they don't allow loans after separation from the company. So withdrawal is my only option. Based on your feedback, I'll make sure to clearly mark it as a 401k withdrawal when I report it, and only include the employer match portion (about $300 of the $5000). I'll also have documentation ready in case there's any delay or questions. I appreciate all the firsthand experiences shared!
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Mateo Gonzalez
•Glad you got some clarity! Make sure to set aside money for taxes too - 401k withdrawals are subject to income tax + 10% penalty if youre under 59.5 years. Found that out the hard way last year lol
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MoonlightSonata
one more thing! if ur claim gets held up after u report the 401k thing dont freak out. mine took 3 weeks like i said but then went thru fine and i got all my back payments. just keep filing your weekly claims like normal even if they show pending
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Sean Fitzgerald
•Thank you for this reminder! I'll definitely keep filing my weekly claims if there's any delay. I've put aside enough to cover about 3 weeks of expenses just in case there's a processing delay. Better safe than sorry!
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