How 401k withdrawals affect weekly ESD benefits - one-time or ongoing reduction?

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.

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

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.

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!!!!

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...

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!

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

Just wanted to add my experience since I went through this exact situation about 6 months ago. I withdrew $8,000 from my 401k while on unemployment - only reported the employer match portion (about $400 in my case) and it only affected that single week's benefits. The key thing I learned is to be VERY specific when reporting it. Don't just put "retirement withdrawal" - I wrote "401k withdrawal - employer match portion only" in the comments section. This seemed to help avoid any confusion on their end. Also, keep your 401k statement showing the breakdown between your contributions and employer match, just in case they ask for documentation later. The whole process went smoothly for me and benefits resumed normally the following week. Good luck with your medical expenses!

I'm in a similar situation and this thread has been incredibly helpful! One thing I wanted to add - if you're withdrawing for medical expenses, you might want to check if your withdrawal qualifies for the medical expense exception to the 10% early withdrawal penalty. The IRS allows penalty-free withdrawals for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. Since you're on unemployment, your AGI is probably lower this year, so you might qualify. It won't affect the ESD reporting requirements (still need to report that employer match portion), but it could save you some money on the tax side. Just something to discuss with a tax professional if the medical bills are substantial!