namealreadyinuse Posted March 15, 2006 Share Posted March 15, 2006 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." Link to comment Share on other sites More sharing options...
Jim Chad Posted March 16, 2006 Share Posted March 16, 2006 In my experience, the taxes plus 10% penalty discourage hardship withdrawels, sufficiently. Link to comment Share on other sites More sharing options...
namealreadyinuse Posted March 16, 2006 Author Share Posted March 16, 2006 Thanks, Jim. We have a bunch of participants who just want the money without having to deal with the cash flow issues associated with loan repayments. Link to comment Share on other sites More sharing options...
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