401k Hardship

[Guest JimD]

After 2001 will the 402(g) limit still have to be reduced in the year the 6 month suspension of deferrals ends by the deferrals made in the prior year?

[MWeddell]

We don't know until we get IRS guidance. Seems to me like the plausible solutions are:

a) One gets one 401(g) limit for the two years beginning with the calendar year when one takes the hardship withdrawal, which is the current rule.

b) The special modification of the 402(g) limit for hardship withdrawals that use the safe harbor resources test is dropped.

c) One gets 1.5 times the 402(g) limit for the two years beginning with the calendar year when one takes the hardship withdrawal.

I'd assume a) until the IRS proposes a change to its regulation even though it seems unlogical now. I personally hope they choose b) because payroll systems and/or recordkeeping systems' compliance with a) is poor and it's just not that important a rule to have to deal with c).