Participant now excluded class--hardship available?

[BG5150]

I have a participant who moved from "regular" employee to union employee, and thus now ineligible for the plan. She has a balance from deferrals and ER contributions.

Can she take a hardship distribution?

[Flyboyjohn]

Yes, she's still a plan participant despite losing eligibility for future contributions

[masteff]

Yep, to my knowledge it's a common occurrence in companies with multiple plans. Just remember that some of the safe harbor hardship rules such as loan utilization and suspension apply across "all other plans maintained by the employer". This can be tricky if you have a semi-automated process that doesn't cross-apply the suspension.

"(E) Distribution deemed necessary to satisfy immediate and heavy financial need. A distribution is deemed necessary to satisfy an immediate and heavy financial need of an employee if each of the following requirements are satisfied—

(1) The employee has obtained all other currently available distributions (including distribution of ESOP dividends under section 404(k), but not hardship distributions) and nontaxable (at the time of the loan) loans, under the plan and all other plans maintained by the employer; and

(2) The employee is prohibited, under the terms of the plan or an otherwise legally enforceable agreement, from making elective contributions and employee contributions to the plan and all other plans maintained by the employer for at least 6 months after receipt of the hardship distribution."