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Plan has the principal residence safe harbor provision. A participant is actively looking to purchase a multiplex building (4 units). He wants to live in 1 unit as his principal residence and lease the other 3 units. He is requesting a hardship distribution to purchase the building. Does this fall under the principal residence safe harbor for hardships? My concern is that the participant is technically purchasing more than his own residence. Any thoughts?

I am a TPA that received a request from a Financial Advisor asking if participant could get a 30 year principal residence loan (allowed in plan) under the following circumstances: Divorce situation - spouse doesn't want a QDRO, but he needs the money to pay his (ex?)spouse. Can't afford to keep his home unless he receives a loan or hardship distribution Hardships use the Safe Harbor criteria so states 'Costs directly related to the purchase of a principal residence for the Employee (excluding mortgage payments)'. The loan policy states that the loan can be for 30 years if proceeds are used to acquire a dwelling unit which within a reasonable time will be used as your principal residence. He already lives in the house, so I don't think he can do the 30 year loan as he is not acquiring the residence. So it appears that the maximum loan could be only 5 years. I don't see a way for him to do either a 30 year loan or a hardship distribution. Is that an accurate interpretation based upon this information? Looks like the spouse's lawyer is smarter is getting her the money without a QDRO so she doesn't have to pay taxes on it, but that's outside of my hands. I've asked for more information to see if there are any other options, such as distribution from Rollover source and/or in-service at age 59.5. But the Financial Advisor may have already looked into these options. Thank you in advance for any thoughts/options.