Participant Gets Hardship Withdrawal - Reason for Hardship No Longer Exists

[rocknrolls2]

A participant in a 401(k) plan requests and obtains a hardship withdrawal to purchase his/her principal residence. Because the contract of sale included a condition that the home pass an engineering inspection, which it failed, the participant was able to cancel the contract. Now, the hardship no longer exists. Assuming that the withdrawal and the disappearance of the hardship occur in the same plan year, should the plan simply reverse the withdrawal to avoid reporting the distribution?

[Guest Sieve]

Look at this thread for some thoughts:

http://benefitslink.com/boards/index.php?s...mp;#entry165079