Hardship Distribution - Primary Beneficiary

[JRG]

A participant in a 401(k) plan currently has no designated primary beneficiary. The participant's mother has recently incurred costs for medical expenses.

Can the Participant designate her Mom as her primary beneficiary and then take a hardship distribution (i.e., make the change and take a hardship distribution after the particiular medical expenses were incurred)?

[Guest Sieve]

If the plan permits beneficiaries to be the subject of harship distributions--which is not required --then the answer is Yes. Here is what Notice 2007-7 (the only guidance we really have) says:

"A–5. (a)

Hardship distributions from § 401(k) plans and § 403(b) plans

. A § 401(k) plan that permits hardship distributions of elective contributions to a participant only for expenses described in § 1.401(k)–1(d)(3)(iii)(B) may, beginning August 17, 2006, permit distributions for expenses described in § 1.401(k)–1(d)(3)(iii)(B)(1), (

3

), or (

5

) (relating to medical, tuition, and funeral expenses, respectively) for a primary beneficiary under the plan. For this purpose, a “primary beneficiary under the plan” is an individual who is named as a beneficiary under the plan and has an unconditional right to all or a portion of the participant’s account balance under the plan upon the death of the participant. A plan that adopts these expanded hardship provisions must still satisfy all the other requirements applicable to hardship distributions, such as the requirement that the distribution be necessary to satisfy the financial need. These rules also apply to § 403(b) plans."

But the plan, by its terms, must allow it.