Hardship Distribution - Primary Residence

[whitboston]

Participant took a hardship distribution for the purchase of a primary residence. At the time of closing something came up and the participant did not end up buying the house.

What happens at this point? Can it be put back into the plan?

[QDROphile]

Was the plan smart enough to deposit the money in escrow for the closing with instructions as to the disposition of the funds? If the closing does not occur, return of the funds by the escrow agent provides a much more comfortable position for replacing funds in the account on the basis that there was never an effective distribution.

[whitboston]

Was the plan smart enough to deposit the money in escrow for the closing with instructions as to the disposition of the funds? If the closing does not occur, return of the funds by the escrow agent provides a much more comfortable position for replacing funds in the account on the basis that there was never an effective distribution.

No, they were not smart enough to do that. The check was given to the participant who cashed it to have ready for the closing.

[JanetM]

This happened in one of my plans couple of years ago. ERISA attorney said it was okay to reverse the hardship since there was no basis for hardship anymore. This was actually made easier by the fact that the tax withholding had not been remitted.