Hardship Distribution and Limit on Tax Withholding

[The 402"(G)"]

Hello All,

Quick question on a scenario:

We have a participant who is taking a hardship from the plan. For argument sake, say the plan allows only hardship withdrawals from Employee money. She has 10,000 in employee money available for hardship (after all necessary calculations), and 10,000 in employer match money NOT available for hardship.

If she elects to take out 9,000 (backup permitting) AND gross up 20% for taxes, are we able to take out 11,250 so she nets out to 9,000 or are we limited to 10,000 - leaving her with a net check of $8,000? I believe we are able to take fee's past the limit (for example a $10,000 withdrawal and then a $100 fee from the Employer Money) but this seems like a different scenario

My feelings and around the office is that you are limited to $10,000, with a net check of $8,000. The logic being that if there is not that limit then you could have scenarios where someone elects 10,000 withdrawn and then another 10,000 "withheld for taxes" to skirt around the Employer money limitation.

Could not find much on this in research. Thank you in advance for the help!

[BG5150]

Money withheld for taxes is still part of the distribution, so you cannot take those funds (in this case) from match.

[The 402"(G)"]

Thank you BG5150