Hardship Educational Expenses

[PFranckowiak]

Have a participant with a loan. Already took a hardship for foreclosure. Now want a hardship for educational expenses.

They want to included the room and board, but the student is living at home.

My take is that room and board has to be for living on campus etc. Also want to include books as educational fees, but I don't think books are a fee either and she cannot provide a bill for them.

Anyone have a source that would explain this more clearly that we can give to the participant?

Pat

[Guest 410b]

Here are guidelines I study on when doing my tax return:

http://www.irs.gov/publications/p970/ch06.html#d0e6201

I don't know if the 401k withdrawal provisions use broader definitions.

[Guest Sieve]

Regs allow educational hardship distribution to include room and board, but hardship distribution cannot exceed the participant's financial need, and there is no financial need for room and board that will not be used. Distribution also can include "related educational fees"--I would agree that books don't fall into this category. If it said "related educational expenses", then that would be a different story.

[masteff]

I'd swear there was some guidance or a worthwhile ruling several years ago but I can't put my hands on it quickly.

The reg says: (3) Payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the employee, or the employee's spouse, children, or dependents

The IRS website says: tuition and related educational fees and expenses

I know that books and basic supplies are viewed as necessary for the purpose of an education. And any required fees are good, like parking permits, computer lab fees, etc.

I'm not comfortable w/ taking any R&B for living at home. Had they simply presented a statement from the school's financial aid office stating "here's our estimate of the cost of attending our school for the next year" then you could use that as a starting point (keep in mind that it's for "up to the next 12 months", you may have to rely on credible estimates as you can't know the exact expenses before they're incurred). But since you now know the student will be living at home, you have to be more strict.

So I'd say yes on tuition, books and fees, but no on expenses for living at home. Depending on facts and circumstances, cost of commuting to school might be possible but that typically won't add up to much (unless it's a 50 mile drive or something).