Hardship for family member to prevent foreclosure

[pam@bbm]

A participant lives with his brother who is the property owner. The brother is facing foreclosure. Can the participant take a hardship withdrawal to help his brother under the reason "payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage of that residence". I think no because he is not the legal owner. Would like another opinion.

[Peter Gulia]

If the plan's provision is the regulations' deemed-need provision, it refers to "[p]ayments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence[.]"

The plan's administrator might ask for information so it can decide whether a foreclosure on the brother's property would result also in eviction of the participant from the participant's principal residence.

[K2retire]

Is the brother also the beneficiary under the plan? That could change the options as well.

[pam@bbm]

The brother is not the beneficiary. My understanding is that hardship withdrawals can extend to spouse, children, or dependents, but only for the medical, funeral, and educational expenses.

[masteff]

While the brother may benefit if the hardship is approved, you would not be granting it for the brother; you'd be granting it for participant to prevent the participant's eviction from the participant's principal residence as Peter discussed above.

Double check how the hardship language is worded in your specific plan documents but I agree w/ Peter that the focus of analysis should be on the participant's eviction from the participant's principal residence.

I would want to look at several factors such has how long as the participant lived there.

[BG5150]

Does the participant have a history of paying his brother some sort of rent?