Hardship to purchase primary residence

[52626]

Participant submitted a request for a hardship to purchase primary residence.  The Buy/Sell Agreement lists the buyer as his wife. The mortgage will be in the wife's name.  They are "legally married and will live together in this house.

Question - although the house is in the wife's name, can the participant take a hardship for the expenses incurred regarding this purchase??

[FormsRstillmylife]

We would allow it, if the participant's name will be on the deed.

[justanotheradmin]

Well, the regulations say "for the employee"  instead of BY the employee. So the answer might be yes, at least based on a the plain language reading of the regulation. 

Reg. § 1.401(k)-1(d)(3)

https://www.ecfr.gov/cgi-bin/text-idx?SID=1a8961f77e559475c12f53d542617134&mc=true&node=se26.6.1_1401_2k_3_61&rgn=div8

https://www.irs.gov/retirement-plans/hardship-distributions-from-401k-plans

"(2) Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);"

I can imagine a scenario where the participant is a minor or someone very young, who perhaps lives with parents, other family, or roommates and the home was not going to be in the employee's name, but they wanted to contribute towards its purchase. The "prevent eviction" language is similar with FOR instead of BY the employee. 

But I have not actually encountered this question in the wild, nor have I heard of any one else encountering it. I'm hoping someone else will be able to comment with more insight or perhaps share their experience .

[justanotheradmin]

Upon further thought, how is the deemed necessary requirement met if it is not the employee's name on the sale agreement or mortgage? If it is the wife making the purchase, is there really an unmet need by the employee?

[BobbyV]

If they're in a community property state it probably doesn't matter.

[Bri]

Isn't it enough to be the participant's primary residence, even if he doesn't own it outright?