Hardship for Medical Expense Paid

[Dazednconfused]

Plan allows for safe harbor hardships, participant paid for medical expenses in prior years with a loan taken from bank. Now participant wants to pay for loan with hardship distribution. Would this fall under a safe harbor hardship rule?

[K2retire]

It would be taking a distribution to repay a bank loan -- not to pay medical expenses. It would only be possible if your plan allows a hardship for repaying bank loans.

[Guest anygig]

There are posts from prior years on this topic in which folks argue that any expenses for medical care are "deemed" immediate and heavy financial needs, regardless of whether they have already been paid or not (ignoring the argument that even medical care paid by insurance could be paid out as a hardship distribution). Arguments seem reasonable both to allow or to disallow the distribution in those posts.

However, I saw no authority for the position to allow a distribution for already-paid medical expenses. Also, a hardship must not only be immedate and heavy, but "necessary," which those arguments did not address. Is a distribution necessary to pay a deemed immediate and heavy need if it has already been paid, irregardless of the source? The other catch with medical expenses is the limitation to those that would be deductible under IRC 213(d) -- expenses from a prior year would be deductible only if an amendment is filed - so are medical expenses paid in a prior tax year still eligible for a distribution? Any authority on the issue would be appreciated.