In its March 2, 2017 Employee Plan News publication, the IRS included their memorandum providing guidelines for examiners to determine if a section 401(k) plan hardship distribution is “deemed to be on account of an immediate and heavy financial need” under the safe-harbor standards. These guidelines included “Attachment I” detailing the information and source documents their examiners should review to affirm a safe-harbor hardship distribution did indeed meet the regulatory requirements.
Employers responsible for reviewing these distributions will find the information in “Attachment I” helpful in their internal procedures approving hardship withdrawals from their 401(k) Plans. All Plan Sponsors with safe-harbor hardship withdrawal provisions in their retirement plans should review “Attachment I” of the IRS memorandum and compare it to their own procedures to make sure they are obtaining complete information from their participants. The IRS memorandum containing the attachment can be found at: https://www.irs.gov/pub/foia/ig/spder/tege-04-0217-0008.pdf
Patricia L. Burris, CFP®
Corporate & Retirement Plan Services