hardship distribution

[k man]

they get better all the time. A client of mine has an employee who wants a hardship distribution in order to purchase raw land and then purchase a double wide trailer to put on the land. this will be his principal residence. the plan provides for hardship distributions based on the deemed immediate and heavy finacial need safe harbors. Of course one of which is purchase of a principal residece.

should I allow the distribution for this land purchase?

[Cathy from Chicago]

In my opinion I think the purchase qualifies since ultimately this place will be his primary residence. The real only difference between this transaction and a regular 'home' is that he's purchasing his residence piecemeal.

[KIP KRAUS]

Just a few thoughts. What assurance is there that this person will buy the double wide? Is there a purchase agreement for both the land and the DW? Does anyone know if he/she will be allowed by ordinance to put a DW on this Property? I would think the Administrator would want some assurance that this will all happen. By the way, how long would the person have before purchasing the DW?

[Guest Joe Vasko]

Does the plan allow for loans? If "yes", the loan provisions must be applied before a hardship distribution can be made. The terms of the loan for primary residence can be as long as the terms of the mortgage. In addition, the tax resulting from a hardship distribution is steep.

[k man]

No loans in plan. I am going to tell the Employer to get a signed statement that says they intend on purchasing trailer. I think is sufficient due dilligence on behalf of plan sponsor.

[Guest]

Don't your hardship withdrawal forms have something where participants affirme that this is a hardship, no other funds available, will meet a listed exception etc? If so then why would you need another form?

[k man]

I thought the statement would be a good idea due to possible time lag in between land purchase and trialer purchase. i guess just extra due dilligence

[KIP KRAUS]

I agree with k man. Just taking the employee's word that the withdrawal is for a qualified hardship to me is not enough. Get a signed purchase offer for the land and DW. In addition, I still contend that evidence should be provided that a WD can be put on the property in question.