Will my 401k withdrawal affect my ESD unemployment benefits? Getting conflicting answers

You DO need to report it! I withdrew $5k from my IRA last year and didn't report it initially. Got hit with an overpayment notice 3 months later because ESD somehow found out (probably from tax records). They considered it income for the week I received it and reduced my benefit for just that week. Had to pay back about $700 and went through a whole mess trying to explain I didn't understand the rule. Save yourself the headache and report it NOW before they catch it!

There's actually an important distinction here. ESD treats different retirement-related money differently: 1. Regular pension/retirement PAYMENTS (like monthly distributions) = reportable income 2. One-time withdrawals from YOUR OWN 401k/IRA = generally NOT considered income for UI purposes The key is whether it's a regular payment vs. a one-time withdrawal of your own contributions. This is a common misunderstanding, and some ESD agents even give incorrect information about it. The official ESD handbook states that withdrawal of your own contributions from retirement accounts is NOT deductible income for UI purposes. I would recommend calling ESD directly to get this clarified for your specific situation, though getting through can be challenging.

i went thru this exact thing!! the rules r super confusing. i ended up having to appeal my case and won because one-time withdrawals from your OWN 401k or IRA are NOT counted as income for unemployment. but if its a regular payment or distribution from a pension then yes u have to report it. the ESD website is garbage at explaining this clearly lol

After struggling with this exact question last year, I finally got a definitive answer from an ESD supervisor. Here's the ACTUAL policy: - Lump sum withdrawals from your OWN contributions to retirement accounts (401k, IRA, etc.) are NOT considered deductible income for UI purposes - Regular pension payments ARE deductible income - Employer contributions that you withdraw MAY be deductible The confusion happens because some ESD agents don't understand their own rules. The problem is getting through to someone who knows the correct policy. I spent 3 weeks trying to get someone on the phone who could help. BTW - I finally got through to ESD using Claimyr (claimyr.com). They have a service that basically waits on hold for you then calls you when an agent is about to pick up. They also have a video showing how it works: https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3. Saved me hours of frustration and I was able to talk to someone who actually knew the rules about retirement withdrawals.

THEY'RE ALL WRONG!!! ESD absolutely counts 401k withdrawals as income!!! I got AUDITED last year and had to repay THOUSANDS because I listened to bad advice like what people are giving here. If you got money, YOU REPORT IT! Don't mess around with these people, they WILL find out and then you're screwed with penalties and interest!!!!

my brother had this happen. he took money from his 401k and didnt report it. nothing happened for like 6 months then he got a letter saying he had an overpayment. had to pay back 1 week of benefits i think. its really dumb how they treat it like income when its literally YOUR money that you already earned.

Just wanted to follow up on my earlier comment - I called ESD again today to double-check because this conversation made me realize I might have received incorrect information before. The agent confirmed that a one-time withdrawal from my own 401k contributions should NOT have been counted as income for UI purposes. They're now reviewing my case for possible adjustment of the overpayment. So I was given wrong information initially! Sorry for adding to the confusion.

Hi there - I work with a legal aid organization that helps with unemployment issues. Let me clarify this situation: Under Washington state unemployment insurance law, a ONE-TIME withdrawal from your OWN 401k/IRA contributions is NOT considered deductible income for UI purposes. However, there are exceptions: 1. If you're receiving REGULAR retirement payments/distributions, those ARE deductible 2. If you're withdrawing employer-matched funds, those MAY be deductible 3. If you're receiving payments from a pension fund based on previous employment, that IS deductible The reason for the confusion is that ESD's written materials don't clearly distinguish these cases, and unfortunately, not all ESD representatives are properly trained on this distinction. If you've made a one-time withdrawal of your own contributions, you technically don't need to report it. However, I always advise clients to call ESD and get the answer documented (ask for the agent's name and ID number, and note the date/time of the call).

I'm dealing with something similar right now - took out about $6k from my 401k last month for car repairs after losing my job. Been going back and forth on whether to report it too. Reading through all these responses, it sounds like the key thing is making sure it was YOUR contributions vs employer matching funds. I'm pretty sure mine was all my own money since I only worked at that company for 8 months before getting laid off. Still planning to call ESD to be 100% sure though - this stuff is way too confusing to guess on! Thanks everyone for sharing your experiences, really helps to know I'm not the only one confused by this.

Just want to echo what the legal aid worker said - this is EXACTLY the situation I went through 8 months ago. I panicked and reported my $4,200 401k withdrawal thinking I had to, and it ended up reducing my benefits for that week unnecessarily. When I called back later to ask more questions, a different agent told me I didn't actually need to report one-time withdrawals of my own contributions. The frustrating part is the inconsistency - some agents know the rules, others don't. What helped me was asking to speak with a supervisor when I called. They tend to be more knowledgeable about these edge cases. Also, when you do call, be specific that it was a ONE-TIME withdrawal of YOUR OWN contributions (not employer matching), not a regular pension payment. That distinction seems to be the key thing they look for. Don't beat yourself up about the financial decision - medical emergencies happen and sometimes you gotta do what you gotta do. Just get it sorted with ESD so you can stop stressing about it!

Hey Sean, I just went through this exact situation about 4 months ago! I withdrew $7,200 from my 401k after getting laid off from my warehouse job and was totally confused about reporting it too. After reading through all these responses and my own experience, here's what I learned: The key is whether it was YOUR contributions vs employer matching. Since you mentioned construction work and it sounds like a one-time emergency withdrawal, it was probably mostly your own money. I ended up calling ESD (took forever to get through) and they confirmed that one-time withdrawals of my own pre-tax contributions don't count as reportable income for unemployment. But here's the thing - I initially DID report it because I was scared of getting in trouble, and it unnecessarily reduced my benefits for that week. When I called back later with more questions, they told me I didn't actually need to report it and could have avoided the reduction. My advice: call ESD and specifically ask about "one-time withdrawal of your own 401k contributions for emergency expenses" - use those exact words. Ask for a supervisor if the first agent seems unsure. Get the agent's name/ID and document the call. Don't stress too much about the financial decision - medical emergencies are exactly what emergency funds (even retirement funds) are for. You did what you had to do! Just get it clarified with ESD so you can stop worrying about it.

Just want to add another data point here - I'm a tax preparer and I see this confusion ALL THE TIME with my clients who've been on unemployment. The IRS and ESD treat retirement withdrawals very differently, which adds to the confusion. For IRS purposes, yes you'll owe taxes and the 10% penalty on early withdrawal. But for ESD unemployment purposes, it's about whether it's considered "new income" you're receiving while unemployed. Your own 401k contributions that you made from previous paychecks aren't "new income" - it's money you already earned and are just accessing early. The problem is ESD's computer systems aren't set up to automatically distinguish between different types of retirement money, so they often just flag anything retirement-related. This is why you're getting such inconsistent information from different agents. My advice: definitely call and get it clarified, but don't panic if it takes a few tries to reach someone who knows the actual policy. Document everything - agent names, dates, what they tell you. And remember, even worst case scenario, we're talking about potentially affecting benefits for just the week you received the money, not your entire claim eligibility.

I went through this exact same situation about a year ago when I was laid off from my retail job. Took out $9,200 from my 401k for rent and utilities after my emergency fund ran out. Like you, I was totally confused about whether to report it. Here's what I learned after multiple calls to ESD (and yes, it took forever to get through): If it's a one-time withdrawal of YOUR OWN contributions that you made from your paychecks, it's NOT reportable income for unemployment purposes. The key distinction is that it's not "new income" - it's money you already earned that you're just accessing early. However, if any portion was employer matching funds, that part might be considered reportable income. Since you mentioned construction work and it sounds recent, most of your $8,500 was probably your own contributions anyway. I'd definitely recommend calling ESD to confirm for your specific situation. When you call, be very specific: "This is a one-time early withdrawal of my own 401k contributions due to emergency medical expenses." Ask for their name and ID number and document the conversation. Don't beat yourself up about the withdrawal - medical emergencies are exactly what these accounts are ultimately for when you have no other options. You did what you had to do to take care of yourself. Just get it clarified with ESD so you can stop worrying about it!

I'm an HR specialist who's dealt with this issue many times when helping terminated employees understand their benefits. The confusion here is totally understandable because ESD's guidance is really unclear on this distinction. Here's the bottom line: A one-time withdrawal of YOUR OWN 401k contributions (the money that came out of your paychecks) is NOT considered reportable income for unemployment purposes in Washington state. This is because it's not "new income" - it's your own money that you previously earned and contributed. However, you should still call ESD to get this confirmed and documented for your specific situation. When you call, use these exact phrases: - "One-time early withdrawal of my own 401k contributions" - "Emergency medical expenses" - "Not regular pension payments" Ask to speak with a supervisor if the first agent seems uncertain - they typically have better training on these edge cases. Get the agent's name, ID number, and document the date/time of your call. The medical emergency was a legitimate reason to access these funds - don't second-guess that decision. Focus on getting the ESD question resolved so you can move forward with peace of mind. Even worst case, we're talking about one week of benefits, not your entire claim.

Just want to add my experience since I went through this exact situation 6 months ago. I was laid off from my manufacturing job and had to withdraw $6,800 from my 401k for urgent home repairs after a pipe burst flooded my basement. I was terrified about reporting it and spent weeks stressed about it after reading conflicting information online. Finally got through to ESD using persistence (calling right when they opened) and spoke with a supervisor who was really knowledgeable. She explained that since it was a one-time withdrawal of MY OWN contributions from previous paychecks, it wasn't considered new income for unemployment purposes. The key thing she emphasized was that I wasn't receiving regular payments - it was just accessing my own money early due to an emergency. I didn't end up having to report it and never had any issues with my claim. But I'm so glad I called to get it officially confirmed rather than just guessing. My advice: definitely call ESD and get it documented. Use the specific language others have mentioned about "one-time withdrawal of own contributions for emergency medical expenses." And don't feel guilty about the withdrawal - medical emergencies are exactly what these funds are there for when you have no other options! Hope this helps ease your stress about the situation. You're going to be fine!

I'm a former ESD claims processor and this thread has some really good advice, but I want to add one important point that might help you feel more confident about your situation. The $8,500 you withdrew - given that you mentioned construction work, this was most likely almost entirely YOUR own contributions rather than employer matching funds. Most construction jobs either don't offer matching or have very limited matching with long vesting periods. So you're probably dealing with money that came directly out of your own paychecks. Here's what I'd recommend based on my experience processing these types of cases: 1. Call ESD and use the exact phrasing others mentioned: "one-time early withdrawal of my own 401k contributions for emergency medical expenses" 2. If you get an agent who seems unsure, politely ask for a supervisor - they have much better training on retirement fund distinctions 3. Get everything documented - agent name, ID, date, and their specific guidance From what you've described, this almost certainly shouldn't be reportable income for UI purposes. The 6 weeks you've already claimed without reporting it shouldn't be an issue - you weren't trying to hide anything, you were just unclear on rules that even ESD agents sometimes get wrong. Don't stress too much about this. Medical emergencies are exactly why early withdrawal options exist, even with penalties. You made the right call given your circumstances. Just get the ESD piece clarified so you can move forward with confidence!

Hey Sean! I just went through this EXACT same situation about 3 months ago - laid off from my electrician job and had to pull $7,400 from my 401k for emergency dental work that couldn't wait. I was just as confused and stressed as you are right now! After reading through all these responses and based on my own experience calling ESD multiple times, here's what I learned: Since you took a ONE-TIME withdrawal of your own 401k contributions for emergency medical expenses, this should NOT be reportable income for unemployment purposes. The key is that it's not "new income" - it's your own money that you already earned and contributed from previous paychecks. I'd definitely recommend calling ESD to get it officially documented though. When I finally got through (took about a week of trying), I used the exact phrase: "one-time early withdrawal of my own 401k contributions for emergency medical expenses." The supervisor I spoke with confirmed it didn't need to be reported and even said the 8 weeks I had already claimed without reporting it was fine since I wasn't trying to hide anything. Don't beat yourself up about the withdrawal - medical emergencies are exactly what these accounts are for when you have no other options. Construction work typically has minimal employer matching anyway, so that $8,500 was almost certainly your own money. Just call ESD to get peace of mind and document everything. You're going to be fine!