Ours is a hardship Q, but may be an issue for other distributions.

Non-rollover, of course.

We assume it violates anti-assignment or alienation to make out distribution check to thrid party (escrow agent for hardship on principal residence or mortgage company for forclosure).

Others have stated that since withholding goes to IRS, that it is ok to make the check out to someone esle.

Ultimately we want to prevent the participant from taking hardship money and spending it on something else and using the same hardshp reason again in the future (We know the hardship part is a different issue and have limited the number of hardships available per year to indirectly address the question).

Is the anti-alienation response too uptight?

I think that a VOLUNTARY assignment is probably ok. See 1.401(a)-13(e)(1) and (2) for the requirements. I don't see why a hardship distribution would be treated any differently from another distribution for these purposes.

But isn't the amount that can be voluntarily assigned limited to 10% of the benefit payment?

Kirk - the 10% limitation is only for future benefit payments once benefits are in pay status. See 1.401(a)-13(d)(1). But for a single payment, (e)(1) and (2) would allow it. At least that's how I read it.

1.401(a)-13(e)(1) provides that "... an arrangement whereby a participant or beneficiary directs the
plan to pay all, or any portion, of a plan benefit payment to a third
party (which includes the participant's employer) will not constitute an
``assignment or alienation'' if--
(i) It is revocable at any time by the participant or beneficiary;
and
(ii) The third party files a written acknowledgement with the plan
administrator pursuant to subparagraph (2) of this paragraph...."

Belgarath:

I agree with your analysis of the provisions of the regulation.

The dichotomy between ongoing payments and lump sums seems counter-intuitive to me; why should you be able to assign 100% of a lump sum but only 10% of a monthly payment? Anybody have any theories as to why the disparate treatment exists?