Can you do hardship for home in construction phase?

[Guest SWH]

Can you do a hardship under safe harbor regulations for costs associated with the draws on a home that is under construction and consider it to be part of purchase of principal residence? How would we go about determining whether those costs had already been pulled under the construction loan or would we?

Any opinions would be greatly appreciated!

[ERISAnut]

Sure you can. The important issue here is that a hardship is deemed to exist for the purchase of a primary residence.

For the second step, determining whether a distribution from the plan is necessary in order to satisfy the hardship would be based on whether the participant can 'fully' meet the need through an outside lending source. From there, you are allowed to accept a statement from the participant attesting not to have such funds; provided that you do not have reliable information to the contrary. You do not have to go out of your way to actually prove or disprove.

Hope this helps.