Loans allowed only for hardship

[Belgarath]

So, now that we have self-certification for hardship reasons for hardship withdrawals...

Some plans allow loans only for hardship reasons. We generally draft the loan procedure to define "hardship" as one or more of the 401(k) "safe harbor" hardship reasons. Occasionally, there are other oddball hardship reasons which are added due to a specific participant situation - furnace died, dog ate the homework, broke a fingernail, etc....

Anyone see a problem with allowing employee self-certification for a hardship reason that is one of the 401(k) "safe harbor" hardships? I feel quite comfortable with it, but perhaps I'm missing something.

Thanks for any opinions.

[C. B. Zeller]

Since there isn't anything in the code or regs that makes special reference to loans for hardship reasons, you can do basically whatever you want. I would just make sure that the plan's loan procedures say something like "a loan will be permitted only in the event that the participant certifies the existence of a hardship" just to be perfectly clear.

[Belgarath]

"Let me make one thing perfectly clear" - for those of us old enough to remember...😁

 

Thanks CB - this is helpful.

[CuseFan]

2 hours ago, Belgarath said:

"Let me make one thing perfectly clear"

Are you saying the participant must also self certify that "I am not a crook" in order to get the loan?

[Paul I]

The participant must also certify that they "did not have sexual relations with that woman".