Hardship Distributions

[Guest Newbie1]

Hi I just wanted to verify something. I was under the impression that only active participants could receive a hardship distribution from the elective deferral portion of their account. I was just asked to prepare a Hardhip distribution request form for a terminated participant.

Am I correct that this cannot be done?

I was thinking that they should probably just amend the plan to allow for immediate distributions upon termination (since they currently have to wait until the plan year end following term.) However I have been informed the employer does not want to do this. I guess this may need to be turned over to their plan attorney

Thanks in advance

[WDIK]

http://benefitslink.com/boards/index.php?showtopic=30962

http://benefitslink.com/boards/index.php?showtopic=31324

[Nate X]

Termination of service is not one of the restrictions for hardship eligibility. However, if a participant is able to take a distribution by any other means (in-service withdrawal or severance from employment), then they must use that first.

In General, there's no benefit to the participant to withdrawal money under the hardship provision vs. a normal/premature distribution. The exceptions to the 10 percent penalty are independent of the hardship rules.

[Archimage]

I think what he is saying is that the participant can't take a normal distribution yet but could take a hardship immediately if was able. My guess is that your plan document will limit hardships to active participants.