Hardship for prepayment of funeral expenses

[jkharvey]

A participant's spouse is currently under care of hospice. The participant wants to go ahead and take a hardship distribution to prepay the funeral expenses. Is prepayment of the expense allowed for hardship?

[Laura Harrington]

A participant's spouse is currently under care of hospice. The participant wants to go ahead and take a hardship distribution to prepay the funeral expenses. Is prepayment of the expense allowed for hardship?

I would say no based on the highlighted word below:

Treas. Reg. 1.401(k)-1(d)(3)(iii)(B)(5):

(5) Payments for burial or funeral expenses for the employee's deceased parent, spouse, children or dependents (as defined in section 152, and, for taxable years beginning on or after January 1, 2005, without regard to section 152(d)(1)(B)); or

[J Simmons]

A participant's spouse is currently under care of hospice. The participant wants to go ahead and take a hardship distribution to prepay the funeral expenses. Is prepayment of the expense allowed for hardship?

I would say no based on the highlighted word below:

Treas. Reg. 1.401(k)-1(d)(3)(iii)(B)(5):

(5) Payments for burial or funeral expenses for the employee's deceased parent, spouse, children or dependents (as defined in section 152, and, for taxable years beginning on or after January 1, 2005, without regard to section 152(d)(1)(B)); or

I agree with Laura. Keep in mind when interpreting the hardship provisions that they are an exception to the general rule against in-service distributions. As an exception, the hardship rules should be read narrowly.

So no 'broad' reading of deceased parent to include one yet alive.