OK, I learned something new today. The important point was the inclusion of the instructions that referenced IRS notice 2020-68. See section D and the questions that follow especially question D-4.
https://www.irs.gov/pub/irs-drop/n-20-68.pdf
There is a new exception to the 10% penalty on early withdrawal for the birth or adoption of a child. This was created in the SECURE act, not the CARES act, and is permanent. The distribution must be taken within one year of the birth or the adoption of the child. What is important for purposes of your question is that a 401(k) is still not eligible for this exception. Other retirement plans are eligible and an IRA is eligible but not a 401(k), I couldn’t tell you why the law was written that way.
The total amount eligible for the penalty exception is $5000, although you will still pay regular income tax on the distribution. Because the 401(k) is not eligible, if you want to use the 401(k) money, you would first need to do a rollover to an IRA.
However, also note that in most cases you can’t withdraw from a 401(k) if you are still employed at the company that sponsors the plan. A 401(k) plan may allow hardship withdrawal‘s, but that is up to the individual company, and the rules to qualify for a hardship withdrawal may vary. If you are no longer employed with the plan sponsor, then it will be no problem to do a roll over to an IRA and then withdraw the money. If you are still employed, you will have to talk with their benefits office about whether or not you can do a rollover treated as a hardship withdrawal.
