No matter how hard you try to avoid it, eventually some document allows both loans and hardship distributions!!

Employee has a vested interest of $22,500 consisting of $10,000 of deferral contributions.

He has applied for and received a loan of $11,000. Now he wants a hardship of his $10,000 of 401(k) contributions under the safe harbor hardship provisions.

Okay?? I don't see how it is not acceptable but need feed back.

Thanks

The preamble to the 401(k) regulations issued in 1991 indicates that it is possible to take both a loan and a hardship withdrawal. See part 4.b. of the preamble to Treasury Decision 8357.

Following thread may be of interest: http://www.benefitslink.com/boards/index.php?showtopic=16081

Saw this situation numerous times. The participant would end up a very small "cash" balance and the loan would make up the remainder. Cash would build back up based on the loan repayments. And in my case, when the person had enough real "cash", a new loan would be taken out.

Just call it the "Bank of 401(k)".....