"Counterproductive actions" hardship distribution provision

[namealreadyinuse]

Anyone have experiences/thoughts about adopting or administering this provision. We are worried about a run on hardship distributions if it makes it too easy to avoid plan loans.

Final 401(k) Reg Section 1.401(k)-1(d)(3)(iv)(D) provides "Employee need not take counterproductive actions. For purposes of this paragraph (d)(3)(iv), a need cannot reasonably be relieved by one of the

actions described in paragraph (d)(3)(iv)© of this section [insurance reimbursement, asset liquidation, stopping elective deferrals, other currently available distributions and nontaxable loans] if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a plan loan if the loan would disqualify the employee from obtaining other necessary financing."

[Jim Chad]

In my experience, the taxes plus 10% penalty discourage hardship withdrawels, sufficiently.

[namealreadyinuse]

Thanks, Jim. We have a bunch of participants who just want the money without having to deal with the cash flow issues associated with loan repayments.