Advice needed for dealing with 401k provider that keeps denying hardship withdrawal for home purchase after submitting all required docs

[Nuggetjr]

We’re being forced out of our rental we had tried to buy because the appraisal fell short. We’re trying to buy a different house and my husbands 401k provider keeps denying it and wanting more info. We have sent the the purchase agreement signed at the real estate agency as well as a loan estimate. We have the purchase price, close date and everything they previously asked for. I just don’t know what to do or why they’re doing this to us. We’re weeks from being homeless if they don’t release our funds. Does anyone know who I can contact for help or what we can do? 

[ratherbereading]

Is there a human resources person he can speak to that can contact the Third Party Administrator, if they have one, administering the plan? I know for the TPA I work for it's the plan administrator that decides if a hardship meets all qualifications, not the 401k provider (e.g. Nationwide, MassMutual).  Not sure if your husband's situation is the same re his 401k plan. Hope it works out for you!

[Nuggetjr]

Thank you! Yes, they are out of the office until Friday, I’ll send him in to talk to him.  We’re dealing with Vanguard. 

[chc93]

It is also possible that his company has outsourced the administrative services to Vanguard.  If so, only Vanguard can help (or not).

[Luke Bailey]

Get a copy of the plan's SPD and see if you have met the requirements described in it. It will specify the money type(s) available and the conditions. If you determine you meet all of the conditions, write a letter to the decisionmaker demonstrating your satisfaction of the conditions point-by-point and the sufficiency of your account and demand that they follow the terms of the plan as described in the SPD.

[Nuggetjr]

Ok thank you will do! 

[jpod]

Consider whether buying a home - rather then renting another one -  is really a good idea for you at this point in time if you must deplete your pre-tax retirement savings in order to do so.  Renting for a while longer until you can save enough after-tax dollars may not be such a bad idea, especially if you are not going to itemize deductions for FIT purposes (which is WAY more likely these days given that the standard deduction for married couples filing jointly is something north of $24,000 and the limit on deduction for taxes is $10,000).     

[jpod]

Not to mention the extra 10% penalty tax, which I assume is in play here.

[rr_sphr]

nothing in the OP suggested they were going to deplete their 401k account, just that they were using some of it for a hardship.   I did this year's ago (first house..now on 4th LOL) to get part of a down payment.  In the end, I agree that it's not always the best idea to pull retirement funds but some can depend on age, financial situation, etc.  That 10% penalty did stink though (but we were in a much lower tax bracket back then...if I pulled out money now, even without the 10% penalty, my taxes would be at least 10% more than they were then)!

[Nuggetjr]

On 9/18/2019 at 5:05 PM, Luke Bailey said:

Get a copy of the plan's SPD and see if you have met the requirements described in it. It will specify the money type(s) available and the conditions. If you determine you meet all of the conditions, write a letter to the decisionmaker demonstrating your satisfaction of the conditions point-by-point and the sufficiency of your account and demand that they follow the terms of the plan as described in the SPD.

How do I find out who makes this decision? We sent in everything they requested again and once again they denied it. It doesn’t have a name, it just says vanguard. 

[Nuggetjr]

I found the admin contact info. I’m going to try to get my husbands HR department involved to see if they can help. I located the admins info, it gives a name and corps. Address. No fax or email info. Would it be wise to contact this person or try to get his local HR department to? 

[jpod]

On 9/20/2019 at 3:34 PM, rr_sphr said:

nothing in the OP suggested they were going to deplete their 401k account, just that they were using some of it for a hardship.   I did this year's ago (first house..now on 4th LOL) to get part of a down payment.  In the end, I agree that it's not always the best idea to pull retirement funds but some can depend on age, financial situation, etc.  That 10% penalty did stink though (but we were in a much lower tax bracket back then...if I pulled out money now, even without the 10% penalty, my taxes would be at least 10% more than they were then)!

Maybe "deplete" wasn't the best word to use; perhaps "reduce."  In any event, if you got a significant benefit from itemizing tax deductions pre-Tax Reform the rent vs. buy analysis was quite different then it is now if you do not get any benefit from itemizing, which is the case for most folks.  

[Luke Bailey]

On ‎9‎/‎21‎/‎2019 at 3:27 AM, Nuggetjr said:

I found the admin contact info. I’m going to try to get my husbands HR department involved to see if they can help. I located the admins info, it gives a name and corps. Address. No fax or email info. Would it be wise to contact this person or try to get his local HR department to? 

Probably wouldn't hurt to ask local HR. A careful review of the SPD (e.g., the identity of the "Administrator," or "Plan Administrator," and how to contact) should reveal what you need.

[Nuggetjr]

On 9/23/2019 at 7:58 AM, jpod said:

Maybe "deplete" wasn't the best word to use; perhaps "reduce."  In any event, if you got a significant benefit from itemizing tax deductions pre-Tax Reform the rent vs. buy analysis was quite different then it is now if you do not get any benefit from itemizing, which is the case for most folks.  
not worried about all that and the 401k is far from being depleted. The only reason we’re having to do a hardship is because we took a smaller loan out to help pay for what our daughters scholarship didn’t pay for. We’re approved for a mortgage, we have to be out of this house ASAP, it’s our only choice. 

 

[RatherBeGolfing]

On 9/20/2019 at 3:34 PM, rr_sphr said:

nothing in the OP suggested they were going to deplete their 401k account, just that they were using some of it for a hardship.   I did this year's ago (first house..now on 4th LOL) to get part of a down payment.  In the end, I agree that it's not always the best idea to pull retirement funds but some can depend on age, financial situation, etc.  That 10% penalty did stink though (but we were in a much lower tax bracket back then...if I pulled out money now, even without the 10% penalty, my taxes would be at least 10% more than they were then)!

I doubt the "tax savings" of your hardship withdrawal is even close to the benefit you would have had if your retirement funds had been left in the account to generate more tax deferred income...  If you do the math from the time of your withdrawal, whether you paid less in taxes when you took it out than you would now is probably a small consideration.  

[Nuggetjr]

So we still don’t have our hardship money despite HR getting involved. They insisted we overnight the purchase order we had originally faxed to them almost 2 weeks ago. We sent that again and we’re still waiting on a response. 

[Nuggetjr]

We finally got our hardship approved!! I don’t think we would have had it not been for all your suggestions and getting HR involved on a corporate level. Thank you all so much! You all truly helped me get this done and I’m thankful from the bottom of my heart! 

[Luke Bailey]

Glad it worked out for you, Nuggetjr.