Will 401k lump sum withdrawal affect my husband's ESD unemployment benefits?

Retirement withdrawals are tricky with ESD. From my experience last year, a 401k withdrawal is considered a one-time payment, not wages or income from work. It should only affect the week you receive it, not every week. But here's the important part - you MUST report it as income for that week, and depending on how much it is, it could reduce or eliminate his benefits for THAT specific week. The following week should return to normal benefit amounts. Just make sure he reports it accurately on his weekly claim for the week he receives it.

BE CAREFUL!!! my cousin did this last year and ESD STOPPED his benefits completely for 3 weeks because they thought he was back to work!! took forever to get fixed!!!

dont forget about the taxes on that 401k if hes not retirement age! we did this and got hit with like 30% tax penalty the next year plus it put us in a higher tax bracket. ended up being a really bad move for us just saying

I went through the EXACT same situation in January 2025. Here's what happened step by step: 1. I received my 401k distribution of $42,500 2. On my weekly claim, I reported it under "Did you receive any retirement pay?" 3. My benefits were reduced to $0 for THAT WEEK ONLY 4. The next week, my regular benefits resumed normally 5. No additional paperwork was required The important thing is being 100% honest on your weekly claim. There's a specific question about retirement payments. Don't try to hide it because ESD does eventually cross-check with IRS data and they can hit you with an overpayment plus penalties if they find you didn't report it. One big tip: If you're struggling to get through to ESD by phone to ask questions, check out Claimyr.com - it's a service that helps you get through to an actual ESD agent. Saved me hours of busy signals and helped me confirm all my 401k reporting questions. They have a video showing how it works: https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3

I'm an employment counselor, and I can confirm what others have said. According to WAC 192-190-070, lump sum retirement payments are only deductible for the week in which they're received. However, be aware of two important exceptions: 1. If the 401k is rolled over into another qualified retirement plan (like an IRA) rather than taken as cash, it is NOT reportable and won't affect benefits at all. 2. If your husband was receiving periodic 401k payments (like monthly distributions instead of a lump sum), those would reduce benefits every week they're received. Since you mentioned a one-time lump sum, it will only affect the specific week you receive it. Make sure to report it under "Did you receive any retirement pay?" on the weekly claim form.

To answer your follow-up question - yes, if you properly rolled over your 401k to an IRA without taking possession of the funds, that's not considered income for unemployment purposes and shouldn't have been reported. You can file an appeal for that week's reduced benefits. You'll need documentation showing it was a direct rollover, not a distribution followed by a contribution.

Not to complicate things further, but I work in financial planning and want to make sure you're considering ALL options before withdrawing from retirement savings: 1. Have you checked if your husband's 401k plan allows for hardship withdrawals or loans? Loans aren't reported to ESD at all and avoid the tax hit. 2. If you're experiencing genuine financial hardship, some 401k plans have provisions that might waive the 10% early withdrawal penalty (though not the income tax). 3. Remember that in 2025, 401k withdrawals before age 59½ generally face a 10% federal penalty PLUS regular income tax, so that $28,000 might end up only being $18,000-$19,000 after taxes. Regarding your original question - yes, it only affects the week you receive it. But please explore all options before permanently reducing your retirement savings.

i thnik i heard somewere that if u get more than $20,000 at once they might investigat your claim?? not sure if thats true but my freind said ESD got suspicious when she got a big insurance payment

I actually went through this exact situation about 6 months ago when my partner lost his job. We withdrew about $35k from his 401k and I was terrified it would mess up his unemployment benefits permanently. Here's what actually happened: Week 1: Reported the 401k withdrawal under "retirement pay" on his weekly claim Week 2: Benefits were reduced to $0 for that week only (since the withdrawal was larger than his weekly benefit amount) Week 3: Regular benefits resumed at full amount like nothing happened The key things that helped us: - Report it honestly on the EXACT week you receive the money - Don't panic if that week shows $0 - it's temporary - Keep all your 401k paperwork in case they ask for it later (they didn't ask us) Also want to echo what others said about the tax hit - we're still dealing with that. The 10% penalty plus regular income tax was brutal, but we were in a desperate situation too. Make sure you set aside money for taxes next year! One more tip: if your husband's former employer had any employee assistance programs, some offer emergency financial counseling that might help you explore other options before touching retirement funds.