Outside of a safe harbor design, hardship withdrawals of matching contributions and discretionary employer contributions may include earnings on the contributions. Matching contributions or nonelective employer contributions (as applicable) must be subject to the in-service withdrawal restrictions that apply to elective deferrals in order to qualify for the safe harbor. Notice 98-52 specifies that Treas. Reg. section 1.401(k)-1(d) must be observed, which appears to restrict earnings on matching contributions and nonelective contributions from hardship withdrawals. Any authority, rumors or thoughts to the contrary?

erisa outline page 11.401, safe harbor contributions not subject to hardship w/d. IRS notice 98-52.