Anticipated Medical Expenses for Hardship

[Oh so SIMPLE]

Plan language uses the reg safe harbor definition for hardship withdrawals.

Employee has requested hardship, just submitting an 'estimate' for cost of breast reconstruction surgery that has not yet been performed. Due to a high deductible re the medical insurance the employee has ($10,000 per year), the hospital and surgeon want payment up front, before the surgery and thus before the expense is incurred.

Any thoughts on whether this can be the basis for a hardship withdrawal of 401k benefits in advance of the medical services being performed?

[masteff]

This is not uncommon.

The reg says: "Expenses for (or necessary to obtain) medical care that would be deductible under section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income)"

Make note of the phrase "or necessary to obtain"... in your scenario, the prepayment is necessary to obtain the medical care.

[Guest Sieve]

And also make note of the deductibility requirement of the medical expense definition. Therefore, if this is not a medically-necessary procedure, and is considered only a cosmetic procedure, then it is not deductible (see IRC Section 213(d)(9)), and therefore not eligible for a hardship withdrawal.