Notice 98-52 provides that in a safe-harbor 401(k) plan that hardship distributions are not a distributable event for contributions other than elective contributions. Presumably this means that the plan cannot permit safe harbor employer or matching contributons on account of hardship.

I tried to trace this restriction in the final regs but could not find it? Can anyone else? I realize this is an interpretation of Code 1.401(k)(12)(E), but I would not read it this way without the interpretation.

In the definitions sections to both the 401(k) and 401(m) final regulations, they state that QNEC's and QMAC's are subject to the nonforfeitability and withdrawal restriction requirements under 1.401(k)-1© & (d). QNEC's and QMAC's cannot be withdrawn for hardship purposes, unless they were "grandfathered" prior to July 1, 1989. Safe harbor non-elective contributions are defined as QNEC's in 1.401(k)-3(b) and safe harbor matching contributions are defined as QMAC's in 1.401(k)-3©. Therefore, since the safe harbor requirements went into effect after 1989, they are not "grandfathered" and cannot be withdrawn from the plan for hardship purposes pursuant to 1.401(k)-1(d)(3)(ii).