Hardship for bad septic tank?

For the “evicted from principal residence” category, would an uninhabitable house qualify?

 I have a participant whose septic system needs repairs.  Without a septic system, the house will be considered uninhabitable and they will have to move out (albeit temporarily).

no, I would say this would be similar to a burst pipe. The bank isn't evicting or foreclosing because of the septic issues. 

Are they evicting themselves?  Their landlord certainly could do it, but otherwise I'm with justanotheradmin on this one.

But what about “[e]xpenses for the repair of damage to the employee’s principal residence that would qualify for the casualty deduction under section 165 (determined without regard to section 165(h)(5) and whether the loss exceeds 10% of adjusted gross income)[?]” 26 C.F.R. § 1.401(k)-1(d)(3)(ii)(B)(6) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(d)(3)(ii)(B)(6).

If the failure arose from a casualty, such as a storm, earthquake, etc., then I agree they would qualify. If the system failed due to normal wear and tear it would not be a casualty loss.

The jokes write themselves.  

See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions

Do you need to notify and/or have the consent of the spouse or former spouse?  

Be careful.  A pending divorce can get you caught in a lawsuit.  Repeat these word - Fiduciary duty to all participants and beneficiaries. 

What is a failed septic system anyway?  It usually happens slowly.  You don't wake up one day and it's failed.  The people who clean the septic system periodically can tell you if it's failing.  I'm not sure this passes the smell test.   Yes - I been there and done that.  

What verification do you have that the septic system has failed. They can usually get it fixed temporarily before the do major repairs just by having it pumped out.  

I smell a rat. 

David

Does a $1000 personal emergency distribution help?  Never had to repair a septic system, so $1000 may be a drop in the bucket, no pun intended.

If you want to step out of the safe harbors (and likely amend your plan), I think it may qualify...

• Due to an immediate and heavy financial need.
• Limited to the amount necessary to satisfy that financial need