Hardship withdrawals-down payment on home

[Guest Lonnie Tomlin]

I should know this because it seems obvious. If you use the safe harbour rules for definition of hardship, is it acceptable to allow people to include in their hardship request the down payment on a prinicpal residence. I have always interpreted this as part of "Costs directly related to the purchase of a principal residence for the employee, excluding mortgage payments." I have seen it in examples in ASPA materials before and know other consultants who also accept it. This is for a large client that has an attorney that tends to challenge everything.

[R. Butler]

Probably O.K. to allow the hardship withdrawal under the safe harbor deifinition. Downpayment on a new home would satisfy Part I (immediate and heavy financial need); administrator should determine if Part II (is it necessary, i.e. can the need be satisfied by other sources) is met. Unless the administrator has knoweldge to the contrary, he/she can rely on the participant's written representation that the need cannot be relieved through other sources.