What is required of participants before they can apply for a hardship withdrawal?

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Participants are required to attempt to exhaust other sources of funds before applying for a hardship withdrawal to ensure that the withdrawal is indeed necessary and justified. This requirement is aligned with the principle that hardship withdrawals should be used as a last resort when all other options for obtaining funds have been explored and are unavailable or inadequate. This step helps protect the integrity of retirement savings plans by encouraging participants to prioritize their long-term financial health over immediate needs.

The idea is that the plan is intended for retirement savings, and the rules surrounding hardship withdrawals are structured to minimize the impact on a participant's future financial security. By mandating that participants seek out other options first, it addresses the potential abuse of hardship withdrawals and preserves the purpose of retirement plans.