Floor-Offset

[Dougsbpc]

A small employer sponsors a defined benefit plan that is offset by employer contributions in a 401(k) plan.

They would like to add a hardship provision to the 401(k) plan.

Even though a 401(k) plan on its own can have a hardship provision, I dont believe it can when it is being used to offset benefits in a DB plan. Perhaps the plan can allow in-service distributions but only at NRA.

Does anyone disagree with this?

[tymesup]

Are you using the deferral account as an offset to the DB benefit?

Are you making hardship withdrawals from the profit sharing account?

[Dougsbpc]

No. Salary deferrals are not used for the offset. This cannot be done.

They would like to be able to withdraw salary deferrals and profit sharing.

[Mike Preston]

Doug, what is your cite for not being able to allow hardships?

[Dougsbpc]

Mike,

I could not find a cite that directly addresses this. Our inclination is to always have the DC plan (that offsets the DB) to operate like a Money Purchase plan as much as possible (normal form of benefit as annuity etc). I know hardships are not allowed in a MPP.

[SoCalActuary]

Assume that the DC plan allowed the hardship withdrawal. This would require you to track the benefit which would have been provided by the distribution. The same would apply if it was a deemed distribution on a loan.

Your problem would simply be administrative, IMO.