Safe Harbor status and impermissible hardship

[30Rock]

A safe harbor plan distributes a hardship under IRS safe harbor hardship rules, to a participant. We know this is an operational failure. What is the correction and consequence? I can see it being treated under the overpayment rules and ask for the distribution to be returned (lets assume there are no other sources that can fulfill the amount of the hardship need).  Does this distribution blow the safe harbor status of the plan by any chance, and are there any other consequences?

 

Thanks!

[Doghouse]

Are you saying the plan has no provision for hardship withdrawals?

[30Rock]

Yes the plan allows for hardships, but the regulations do not allow safe harbor contributions to be withdrawn for a hardship.

[Belgarath]

Can you clarify your original question - were the hardship amounts distributed just from deferrals in a safe harbor plan, or did they include actual employer safe harbor contributions?

[30Rock]

Employer safe harbor matching contributions were distributed for a hardship distribution.