May a hardship distribution be taken from safe harbor contributions, QNECs, or QMACs? Rev. 02/09/07, E-mail Alert 2007-2

No. Generally, hardship distributions may be made only from elective deferrals. However, there are some exceptions.

Earnings on elective deferral earnings, QNECs, and/or QMACs credited to the plan prior to 1989 (or, in some cases, by the end of the plan year ending July 1, 1989) may be withdrawn as part of the hardship distribution, provided the pre-1989 earnings have been accounted for properly and thus, can be determined.

Further, plans may be designed with provisions to permit hardship withdrawals to be made from rollovers, transfers, and/or vested employer contributions (such as nonelective and matching contributions).