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I need a hardship lonan what do i need to do?

Mar 12, 2014 by laquisha from Holly Springs, MS in  |  Flag
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Peter C. Karp Level 20

Laquisha,

First of all, I assume you are asking about taking a hardship loan from your 401(k) plan. You will need to contact your employer’s HR department to find out what options are available to you. Some companies offer both a standard loan option and a hardship loan option. The conditions are different for each and there are specific circumstances that constitute a hardship withdrawal. Your HR department will be able to provide you with the specifics and terms.

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Comment   |  Flag   |  Mar 18, 2014 from San Francisco, CA

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Hello Laquisha,

Sorry that you are suffering a financial hardship. This response is for a hardship distribution. Not for a loan. I am unclear as to which you are requesting as they are two separate things.

Ultimately you will have to work with your company’s plan administrator and recordkeeper to take the hardship distribution. If you do not know who they are then look at your quarterly statement. There should be a phone number for participant services.

But first you have to be sure you can even take a hardship distribution. Your plan must allow it. You can find out by reviewing the summary plan description you were given when you became eligible to participate in the plan. Second, the IRS requires you to qualify for a hardship distribution. The permissible reasons are medical expenses, purchase of a principal residence, eviction or foreclosure, tuition, funeral expense, or casualty loss. You will have to submit documentation to your employer that you qualify for one of these six reasons.

In addition please be aware that the distribution will be taxable to you and if you are under the age of 59 1/2 you will suffer a 10% IRS penalty as well. Also you will be prohibited from making future contributions into the plan for a period of six months. The point is if you can avoid the distribution and find the funds from another source that might be the best thing to do.

Hope this helps.

Comment   |  Flag   |  Mar 13, 2014 from Woodbridge, VA

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