Purchase of principal residence for the participant. Payment of college tuition and related educational costs such as room and board for the next 12 months for the participant, the participant's spouse or dependents, or children who are no longer dependents. Payments necessary to prevent foreclosure or eviction from the participant's principal residence. Funeral and burial expenses. Repairs to damage of participant's principal residence. Some employers may disallow one, several, or all of the previous hardship causes. To maintain the tax advantage for income deferred into a 401(k), the law stipulates the restriction that unless an exception applies, money must be kept in the plan or an equivalent tax deferred plan until the employee reaches years of age. Money that is withdrawn prior to the age of typically incurs a 10% penalty tax unless a further exception applies. This penalty is on top of the "ordinary income" tax that has to be paid on such a withdrawal. The exceptions to the 10% penalty include: the employee's death, the employee's total and permanent disability, separation from service in or after the year the employee reached age 55, substantially equal periodic payments under section 72(t), a qualified domestic relations order, and for deductible medical expenses (exceeding the 7.5% floor). This does not apply to the similar 457 plan. As a response to the COVID-19 pandemic, the CARES Act allowed people to withdraw funds before the age of up to $100,000 without the 10% penalty due for 2020. Loans Many plans also allow participants to take loans from their 401(k). The "interest" on the loan is paid not to the financial institution, but is instead paid into the 401(k) plan itself, essentially becoming additional after-tax contributions to the 401(k). The movement of the principal portion of the loan is tax-neutral as long as it is properly paid back. However, the interest portion of the loan repayments are made with after-tax funds but do not increase the after-tax basis in the 401(k). Therefore, upon distribution/conversion of those funds, the owner will have to pay taxes on (only) the interest funds a second time. The loan principal is not taxable income nor subject to the 10% penalty as long as it is paid back in accordance with section 72(p) of the Internal Revenue Code. This section requires, among other things, that the loan is for a term no longer than 5 years (except for the purchase