Hardship Withdrawal

[Guest Bergy]

We have an individual who is on House Arrest right now. He is living with a family member.

He is trying to qualify for a Hardship Withdrawal so he has money to pay for first month's rent and such once he is released from House Arrest.

I don't think this qualifies...your thoughts?

[Mike Preston]

Does the plan have the safe harbor rules with respect to hardship? If not, I would think that it most certainly satisfies the general definition.

Besides, I'm a little bit curious. Is this person still employed? If not, wouldn't they be eligible for a regular distribution at some point? Or is there some sort of delay with respect to termination distributions (not payable until after 1 year break in service, for example) that the participant is trying to finesse with a hardship?

If you implement the safe-harbor rules the participant must fully exhaust their ability to borrow from the plan before a hardship can be granted.

With a slight twist, even the safe-harbor rules might be satisfied. Just have the place he is currently under house arrest insist on a rental payment or else they will evict. Wouldn't that satisfy the need?