Years ago I worked for a large global pharmaceutical company. They allowed hardship withdrawals from your 401k. You were taxed heavily and couldn't contribute for six months.
Fast forward to now, I work for a smaller company with less than 600 employees. I have money going into the 401K. I find myself in financial straits and would like to take out a hardship withdrawal. The company managing the 401K says there are only four reasons they will allow a withdrawal:
1. Paying for a mortgage
2. Avoiding foreclosure or eviction
3. Medical bills
4. Having to pay college tuition
None of these are the reasons I need the money. I’ve fallen behind on some bills. Also, I was in serious car accident and my home was burglarized in April. I need the money to avoid utility shut-offs and eviction. The company will not be swayed, citing IRS regulations. However, the IRS allows for Hardship withdrawals. The company said I could check with my employer, my employer checked with company and was basically told let us do the job you allowed us to do.
My question is this if I can prove a hardship, can this company legally prevent me from taking a withdrawal? Their suggestion is that I take a loan from my 401k, essentially borrow my own money and pay it back with interest using payroll deductions. Do I have any recourse other than to leave the company which isn’t an option
Read more: Can company legally keep your 401K?