I don’t think you understand what hardship withdrawals are all about.

These are special exceptions, listed specific hardships, under which the plan will make an in service distribution and you must document your hardship and in some cases even sign the form under penalty of perjury that your needs are legitimate and satisfy the listed types of hardships the plan authorizes and that is where you will spend the money. There are no funds allowed to be rolled over simply because the funds must be used for hardships and none would be left to roll over. Further, these distributions are subject to tax and early withdrawal penalty unless your hardship itself is justification for a penalty exception (eg high medical costs).

You could use the funds for unstated purposes including funding a NQ annuity purchase or even a regular IRA contribution, and the plan may or may not discover what you did, but in any event you will have paid tax and penalty on the hardship distribution, and the plan may take some action against you if they find out. It’s not a good or tax efficient way to get funds out of this plan.

If this is a lousy plan, consider getting together with other employees and pressure management to improve it in whatever ways you think it is deficient, especially if the employer is starting to recover from the bad economy. Of course, there is always the option of getting a new job and then you will have unresticted access to the prior plan funds.

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