Hardship w/d on top of loans

[pbarrett]

We have a participant who had a $40,000 balance and borrow $20,000 (rounding numbers of course). He has made a couple of payments but now says he has a family emergency and needs to take a hardship w/d for $9500. The plan permits loans and hardships.

The only real question I have is can he now take the $9500? Does it in any way violate the 50% rule (can only take 50% for a loan of vested balance) or does the 50% only matter on the day the loan is made????

Thanks for any input.

[four01kman]

Total vested account balance is about $40,000, made up of $20,000 note and $20,000 investments. It seems there is enough to satisfy a hardship, if all the rules of the plan are met. The 50% "security" rule is met at loan inception.

[Guest cease]

I agree that the 50% rule only needs to be satisfied at the point that the loan is processed. In addition, the participant has applied to access his/her money correctly - borrowed then applied for a hardship.

Don't know what the provisions of this plan are, but you mentioned a family emergency and $9,500.

1. Does the plan allow for a condidtion that qualifies as a "family emergency?" Most plans follow the safe harbor approach - medical, tuition, eviction/foreclosure, purchase of a primary residence. Any other reason may not allow the participant to access these funds.

2. Again, assuming that the plan follows the safe harbor approach, has the participant made at least $9,500 in actual 401(k) contributions?

Hope this helps.

[pbarrett]

Yes, most of the remaining balance represents deferral money. The emergency we found out today is really forclosure on his home.

Thanks for your help!