Wants to "reverse" the hardship distribution

[Pension Panda]

The plan participant requests a hardship for the purchase of a principal residence. He signs all the paperwork, needs the check for the closing so the Plan Sponsor has the check cut from the plan with the understanding they would get the HUD statement as backup once the deal closed etc.. Participant gets to closing and the deal falls through! Now the participant wants to put the money back into the plan to avoid paying taxes and the 10% early withdrawal penalty, and wants to start contributing to the 401(k) again. Do you know of any "mistake in fact" allowances (or something) that would allow the reversal of this "hardship" withdrawal that should never have been approved? We can't find any guidance on this anywhere.

[ETA Consulting LLC]

Not really. As long as proper protocol was followed when making the hardship determination and issuing the distribution, then you cannot put the funds back; that would be too much like a loan. When making a determination, there isn't a requirement to follow up and make sure the transaction actually took place.

Good Luck!

[QDROphile]

Too late now, but a careful use of escrow might have yielded a better result.

[Kevin C]

I disagree. If the employer finds out that the participant was not really eligible for a hardship distribution, I think it is an overpayment that can be corrected under EPCRS.

Here is a previous discussion.

http://benefitslink.com/boards/index.php?showtopic=48405