Hardship and Deferrals

[Guest Serena]

Can you apply facts and circumstances for hardship purposes to deferral contributions, without meeting a safe harbor need/event and without requiring suspension for 6 months? So all accounts - employer contributions and 401k deferrals - can be distributed based on facts and circumstance approval to buy a car, if this was determined to be an immediate and heavy need. Also, since plan has not elected to apply safe harbor standard, deferrals do not have to be suspended? Assume this is a volume submitter document. Is this permitted?

Thanks!

[K2retire]

What does the document say are the criteria and available sources for a hardship?

[QDROphile]

The document can be written to avoid the 6 month suspension if the adminisrator does not rely on the 6 month supension for a distribution to be deemed as necessary to satisfy the immediate and heavy financial need. The adminstrator is required to determine that alternate resources are not available to the participant. Treas. Reg. section 1.401(k)-1(d)(iv)© is available to the administrator. The determination about the car being an immediate and heavy financial need is another subject and a different safe harbor is involved in the determination.

[Guest Serena]

I do not normally work with facts and circumstances. The plan actually does not allow deferrals to be distributed via facts and circumstances only employer contributions so that is what I am used to, but I guess this a document choice. I was told by co-worker that facts and circumstances is not limited to employer contributions. So I am trying to get to the actual regulatory answer. The regs appear to state that the 401k deferrals are subject to distribution restrictions and the resource test - take all loans or access all other resources first, then suspend deferral. Another article I read states only non deferral money is restriction free - ie no loan is required, no suspension.

?

[QDROphile]

Although nonelective contributions are not subject to the same rules for in-sevice distributions as elective deferrals, when it comes to hardship as a reason to allow the distribution most plans still apply the 401(k) standards because of greater comfort that the 401(k) standards will comply. The other rules are not as precise, so borrowing from 401(k) feels better and administrators are more used to applying the 401(k) rules.

Some nonelective contributions are subject to some of the restrictions that apply to 401(k) deferrals.