How does a participant show that he or she is experiencing a hardship?
Generally, if a 401(k) plan provides for hardship distributions, the plan will specify what information must be provided to the employer to demonstrate a hardship.
Examples of events that may be considered unforeseeable emergencies include imminent foreclosure on, or eviction from, the employee's home, medical expenses, and funeral expenses. However, certain distributions from an IRA that are used for expenses similar to those that may be eligible for hardship distributions from a retirement plan are exempt from the additional tax on early distributions.
Because these answers do not apply to every situation, yours may require additional research. Under what circumstances can a participant get a hardship distribution from a retirement plan?
A retirement plan may, but is not required to, provide for hardship distributions.
A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the employee. §1.401(k)-1(d)(3)(iii)) A distribution is not considered necessary to satisfy an immediate and heavy financial need of an employee if the employee has other resources available to meet the need, including assets of the employee's spouse and minor children.
Whether other resources are available is determined based on facts and circumstances.