Employment Status & Hardship

[Below Ground]

Person was an active participant under a 401(k) Plan until employment terminated in September. Plan terms require that person can't be paid until after closure of the plan year; meaning, termination distribution can't be paid now. Person just learned that beneficiary diagnosed with terminal illness; meaning, medical bills (and other issues). Plan does allow for Hardships. Can this person get a Hardship Distribution even though no longer employed? Is this question impacted by new standards that allow a beneficiary to obtain a Hardship?

[PensionPro]

http://benefitslink.com/boards/index.php?showtopic=23129

[Below Ground]

Thanks for the link PPro. I tried searching before I posted my question, but did not find that posting. Guess I should look a little harder next time.

It sounded like there was no definitive answer in that thread. There were, however, several helpful comments.

The postings related to termination distributions are interesting, but not relevant to this situation. The defined term "participant" makes no distinction between active and terminated. However, the posting by Masteff regarding placement in the document, is very relevant. The hardship section is under In-Service Distributions. While I'm not sure this resolves the issue, it does allow a logical decision to be reached.

Again, thanks for providing the link. It was a great help!

[Sully]

The answer might be provided in the plan document. The EGTRRA documents for Corbel and Datair specifically address this issue. I have not had to look for it in any other documents.

[Below Ground]

What do they say? Is it an option? Thanks.

[BG5150]

We sometimes use the Corbel Volume Submitter. The hardship section is one unto itself in the "Determination and Distribution of Benefits" chapter. It states that a "Participant" may take a hardship. However, "Participant" is defined as someone who (paraphrasing) is participating in the plan and has not become ineligible to participate any more. I take that as "no terminated people are 'participants'."

In this case, I would say no hardship is allowed.

Do you have access to the people who wrote your document? Can you ask them?

[Sully]

The Datair document covers it in the basic plan document (on a prototype plan) and it says..."the availability of hardship distributions to Participants is limited to Participants who have not terminated employment."

Under the Corbel document it is optional. There is a choice in the adoption agreement where you elect whether or not a "Participant" includes a former Employee at the time of the hardship distribution.

[Below Ground]

Thank you both for your replies. Also, I think that contacting the vendor is a perfect suggestion. Again, thanks.