Hardship for tuition

[JPIngold]

A participant is asking for a hardship of $20,000 although the recent tuition and related costs are being paid by Sallie Mae draws. The document says hardships are allowed for costs for the upcoming 12 months. She is needing help keeping up with the existing payments (and apparently other things would be my guess).

If she can document that she will be needing $20,000 of tuition and costs in the next 12 months (even though they will be covered by new loans) can the employer authorize the distribution? My thought is no, but if she has $20,000 in costs in the next 12 months, does what she actually does with the money matter to the employer sponsor?

I hate hardship distributions!!!

Thanks.

[K2retire]

Besides the list of allowable reasons for a hardship, there is the part of the rule that says there must be no other source of funds to pay for it. In this case, it sounds like there is another source of funds available.

[JPIngold]

That is a great point, too. I feel bad for the person, but I just don't see how I can suggest they approve it.

[masteff]

Just talking out loud...

1) it would be different if you didn't have knowledge that she intends to take student loans.

2) at the end of the day, what would matter on IRS audit is that the file clearly documents the amount of need and does not document anything adverse (such as sallie mae).

[JPIngold]

Couldn't agree more. Thanks for your input.