Hurricane Katrina Loans and Harships

[Guest maac3]

Generally, a participant must exhaust all possible sources of financial assistance, including plan loan, prior to applying for a hardship.

With regards to victims of Hurricane Katrina, do you think they are required to apply for a plan loan before requesting hardship?

Thanks

[Belgarath]

Technically, I think yes. 2005-70 limits the amount of the hardship withdrawal to amounts that would otherwise be available for hardship withdrawal. However, I do wonder if this would ever be enforced - I mean, if the plan were ever audited, and this was even picked up, would the IRS really stick a plan on this? I'd like to think not, but I obviously have no way of knowing. Also possible that additional legislative or regulatory relief will follow and hopefully make the question moot.

[Guest maac3]

Thanks for the comments.

[Guest IU1994]

A related question: Neither IRS Announcement 2005-70 nor Bill 3768 that passed both houses of Congress addresses whether a plan that limits loans to 1 outstanding loan per participant can make a 2nd loan to a participant affected by Katrina.

2005-70 only says that a plan that didn't have a loan/hardship provision can allow loans/hardships and "retroactively" amend to add such a provision. Presumably, the spirit and intent of the relief offered by Congress and the IRS would also allow multiple loans where the adoption agreement limits loans to one.

Anyone seen this addressed anywhere?