Harship Withdrawal

[Guest awallace]

Can an employer allow a hardship withdrawal for a reason other than the standard 4? (medical, education, residence, eviction).

We have always administered our plan according to these 4 reasons only, but our plan administrator is telling us that, as the employer, we can authorize a hardship withdraw for other reasons.

[Guest amy darnell]

the standard 4 to which you refer is the 'safe-harbor' method of determining hardship; there is also the 'facts-and-circumstances method' that can be used to determine hardship, which essentially means that the need is immediate & heavy, and the withdrawal is necessary to satisfy that need (which can generally be relied upon in writing from the participant as long as the employer has no evidence otherwise).

the safe harbor method provides more protection by outlining specifics & helps for non-discrimination purposes. i often work with employers whose plan documents define hardship according to the safe-harbor method specifically, so you would obviously want to check your document to ensure that it even allows the facts & circumstances test because you don't want to be in operational violation. documentation for determining hardship is a big issue, too, even if you are using safe-harbor method.

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