401(k) Hardship Safe Harbor - Post Secondary Education

[Guest jlucc]

Does a "Beauty School" qualify as a Post Secondary education under hardship safe harbor rules?

[jaemmons]

A prerequisite to attend a post-secondary school is that the individual must have completed "primary" education (HS diploma). Last time I checked, you don't need a HS diploma to attend beauty or any related trade school, which would disqualify it as a "post secondary" educational institution. Therefore, the participant would not meet the "financial needs" test of the safe harbor hardship requirements. However, if the plan allows for "facts and circumstances" the plan administrator may allow for this.

[Guest Remysis]

I wouldn't be so dismissive of this one.

I don't believe "postsecondary education" is actually defined in the Code. The closest thing is "qualified higher education expense" under section 529. For this the test is whether school is eligible for federal financial aid to students under Title IV. This certainly includes accredited career schools such as beauty school, massage, tractor trailer driving, etc. I would also note that, in guidance regarding 529 plans and HOPE and lifetime learning credits, the IRS tends to equate "postsecondary" with the types of schools eligible.

I readily concede this isn't exactly on point, and "postsecondary" may be read to impose its own separate requirement. Still, if it's good enough for a tax-free distribution from a 529 plan, it's good enough for me for a hardship withdrawal. With cautions, I have advised clients that the "eligible for Title IV financial aid" is a sensible rule of thumb.