When a participant requests a hardship withdrawal, what proof of hardship does the employer need?
Rev. 06/19/03, E-mail Alert 2003-11

Under prototype documents using safe-harbor rules, the employee must document one of six safe harbor reasons for hardship. The employee does not have to prove that he or she has no other available assets due to the mandatory suspension of deferrals for six months (an EGTRRA change).

However, the situation is different if the plan is not a prototype plan and the “facts and circumstances” rules are being used to determine hardship. In the facts and circumstances situation, the employer may rely on the employee’s written representation of the financial hardship. That representation may be rejected if the employer knows for a fact that there are other resources available to the employee. As part of their administrative policies, some employers request proof that a loan request has been rejected by a commercial lender before considering the employee eligible for a hardship withdrawal.