hardship withdrawals and catch-ups

[LIBERTYKID]

Is there any prohibition on permitting a hardship withdrawal from elective deferrals including catch-up contributions? Catch up contributions are defined in the Code (I think) as elective deferrals. If the plan provides that a hardship distribution cannot exceed the amount of the participant's elective deferrals, then does the plan permit hardship withdrawals from catch-up contributions automatically?

[R. Butler]

I don't see why not. Except for the non-applicability of contribution limits, catch-up's are treated as a deferral.

[Brian Gallagher]

I would say yes, all of the deferrals would be eligible for hardship withdrawal. My reasoning: if this participant is an HCE and the plan is using the current year method of ADP testing, he/she will not know until the end of the year exactly how much regular elective defferal and how much catch-up there will be.

The HCE may be relegated to a dollar amount much less than $11,000 of regular deferral due to the ADP test. Contributions above the ADP limit will be considered catchup (up to $1,000). If the HCE took a hardship during the year, he or she would not know if the deferral hit the ADP limit, and after year end it would be too late--the money has already left the trust.