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"Counterproductive actions" hardship distribution provision

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Anyone have experiences/thoughts about adopting or administering this provision. We are worried about a run on hardship distributions if it makes it too easy to avoid plan loans.

Final 401(k) Reg Section 1.401(k)-1(d)(3)(iv)(D) provides "Employee need not take counterproductive actions. For purposes of this paragraph (d)(3)(iv), a need cannot reasonably be relieved by one of the

actions described in paragraph (d)(3)(iv)© of this section [insurance reimbursement, asset liquidation, stopping elective deferrals, other currently available distributions and nontaxable loans] if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a plan loan if the loan would disqualify the employee from obtaining other necessary financing."

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