Room under EPCRS for hardship withdrawal from MPPP?

[Guest Bearlee]

The Plan Sponsor of a MPPP allowed a hardship distribution because the distribution application form (a QRP prototype forms) had a hardship distribution check box on it so naturally the plan sponsor and participant thought it was allowable. The participant was 52 years old and not of NRA or ERA. Oddly enough the MPPP permitted employee contributions, but I don't think the participant had any money in his employee contribution account. The adoption agreement was silent on whether hardship distributions were allowed but the prototype document stated something like "if this is a profit sharing plan, then in-service and hardship distributions are permitted" and from that I infer that this means they were not allowed in the MPPP, no matter what.

Is there a way to correct this within EPCRS? I know there is a correction mechanism for 401(k) plans in that the plan sponsor would just amend the plan, but this is seemingly unavailable for MPPPs. If not, any recourse at all?

[QDROphile]

You would probably be able to correct under VCP, but the correction would probably require putting the money back.

[J Simmons]

Dig deeper into whether there were employee contributions by this employee. I had a very similar situation 3 years ago with a client. There were employee contributions in that case, sufficient to cover the hardship. The VCP correction permitted was to amend, retro to date of the hardship withdrawal, to allow such out of accumulated employee contributions sans investment earnings per an old revenue ruling. This was better, under the circumstances we were facing, than having to require the employee to pay back the withdrawn amount.