What constitutes a “hardship” for withdrawal purposes? Why can a participant withdraw from the plan and stop participation?
Generally, and subject to the terms of the written plan document, under the Internal Revenue Code a hardship withdrawal is a distribution for the following safe harbor reasons: (a) For the purchase of a primary residence (not a vacation home or rental property). (b) To pay for post-secondary educational expenses for the participant or his/her dependents. (c) To pay for un-reimbursed medical expenses for the participant or his/her dependents. (d) To prevent eviction from or foreclosure on the participant’s primary residence. (e) To pay for certain funeral expenses. (f) To pay for repairs to a primary residence resulting from a casualty loss. When determining whether or not the conditions for a hardship withdrawal have been met, the participant must present proof, such as medical bills, tuition bills, a purchase and sale agreement for their primary residence, or an eviction or foreclosure notice. If the plan (or any other plan sponsored by the same employer) permits loans, the participan
