![]() For example, an employee requesting a hardship to purchase a principal residence doesn’t have to obtain a plan loan if the loan would disqualify the employee from obtaining other necessary financing. Plan loans or reasonable commercial loans.Īn employee doesn’t have to use alternative resources if doing so would increase the amount of the need.The employee’s pay, by discontinuing elective deferrals and after-tax employee contributions.Unless the employer has actual knowledge to the contrary, the employer may rely on the employee’s written statement that their need can’t be relieved from other available resources, including: The employee couldn't reasonably obtain the funds from another source. ![]() ![]() The distribution is limited to the amount needed to cover the immediate and heavy financial need, and.The amount of a hardship distribution must be limited to the amount necessary to satisfy the need. Certain expenses to repair damage to the employee’s principal residence.Funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary.Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence.Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for the employee or the employee’s spouse, children, dependents or beneficiary.Costs directly related to the purchase of an employee’s principal residence (excluding mortgage payments).Medical care expenses for the employee, the employee’s spouse, dependents or beneficiary.Under a “safe harbor” in IRS regulations, an employee is automatically considered to have an immediate and heavy financial need if the distribution is for any of these: Effective March 7, 2017, 403(b) plans may elect to use the "Summary substantiation method" for the six types of hardship distributions below.23, 2017, 401(k) plans may elect to use the "Summary substantiation method" for the six types of hardship distributions below. The employee isn't allowed to make elective deferrals to the plan for at least six months after the hardship distribution.The employee has obtained all other currently available distributions (including distribution of ESOP dividends under section 404(k), but not hardship distributions) and nontaxable (at the time of the loan) plan loans, including all other plans maintained by the employer.The distribution isn't greater than the amount of the immediate and heavy financial need, including the amounts necessary to pay any taxes resulting from the distribution. ![]() ![]()
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