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Can a participant request a “Hardship” distribution from the plan?

April 26, 2017distribution hardship participant Plan request

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Can a participant request a “Hardship” distribution from the plan?

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Yes, if the plan document provides for hardship distributions. However, if any portion of the withdrawal comes from the participant’s 401(k) deferrals, it will only be allowed under certain “Safe-Harbor” reasons. The IRS has determined those reasons to be: 1. Medical payments 2. Certain Tuition Payments 3. Purchase of the participant’s primary residence 4. To prevent eviction 5. Funerals 6. Casualty Loss In addition, the participant must stop deferring for 6 months following the hardship withdrawal from the 401(k) account.The rules governing hardship withdrawals and in-service distributions, in general, are complex and heavily dependent upon the particular plan document. Failure to follow the rules can endanger the qualified status of the plan.