Harship Distribution

[Jilliandiz]

Participant wants to take a hardship distribution. The plan allows for loans, but a loan would put him in hardship, therefore does he qualify for a Hardship before a loan?

Also, the hardship would be to pay off some of his mortage he owes on his house?

[stephen]

You do not have to force a participant to take a loan if the loan would cause a hardship. There are many posts on these boards to support this statement.

If the participant otherwise qualifies for a hardship distribution under the plan document in my opinion it is ok to proceed with the hardship distribution.

[wsp]

I realize that it's not related directly to your question, but if your plan is using the safe harbor hardship standards to house expenses, the hardship can only be used to purchase or prevent eviction or foreclosure. Simply being in arrears doesn't necessarily cut it. If the participant is trying to save the credit score then the loan is is the route to take. I'd check the document to see if you are using the hardship safe harbor or facts and circumstances.