Hardship Distribution

[Belgarath]

A little discussion going on. Suppose you have an adult child - not a dependent - say 30 years old. Participant wants to take a hardship withdrawal to pay the tuition.

I see no problem with this under the regulation, but I suppose it could hinge on how you interpret it, and in conjunction to the reference to Code Section 152.

The regulation deems it an immediate and heavy financial need for "...the employee, or the employee's spouse, children, or dependents(as defined in section 152...)

Now, I read the reference to 152 as applying only to the definition of "dependent" and not applying to spouse or children. And therefore, the term "qualifying child" in 152 is meaningless for this question - it matters for tax purposes if determining whether the child is a dependent, but not for determining whether the hardship withdrawal to pay the tuition for "children" is allowable under the 401(k) hardship distribution rules. I think if the IRS had wanted to limit it to dependent children, they would have so specified, but they didn't.

Opinions?

[BG5150]

I agree.  30 yr old "child" is eligible for h'ship.

[Peter Gulia]

In 26 C.F.R. § 1.401(k)-1(d)(3)(iii)(B)(3):

 

the enumeration of “or the employee’s spouse, children, or dependents” is disjunctive;

 

the mentions of IRC § 152 are in a parenthetical phrase that refers only to “dependents”; and

 

the noun “children” is unmodified by an adjective or a reference to a definition.

 

As always, this is not advice to anyone.

 

 

 

[Belgarath]

Now there's a nice, technical answer. Thanks Peter! (and thanks BG)