Electronic Self-Certification for Hardship Distributions is Not Sufficient

Anne M. Meyer • May 27, 2015

In its April 1, 2015 Employee Plans News , the IRS stated that defined contribution plan sponsors must maintain hardship distribution records and that plan sponsors cannot rely on electronic participant self-certification for hardship distributions.

The IRS indicated that plan sponsors should keep the following:

  • Documentation of the hardship request, review and approval;
  • Financial information that substantiates the employee’s immediate and heavy financial need;
  • Documentation to support the hardship distribution was properly made; and
  • Proof of the actual distribution made and the related Form 1099-R.

In recent years, a number of third party administrators have started offering an electronic self-certification in which participants may certify their own hardships and are required to maintain their own records of the hardship distribution.  In the Employee Plans News , the IRS indicated that allowing participants to self-certify a hardship and maintain the records is not sufficient because the records can be inaccessible in an IRS audit.

If your defined contribution plan currently permits employees to electronically self-certify hardship distributions, we suggest that you consider changing this process by requiring review and approval of all hardship distributions.  We also suggest that you consider maintaining proper documentation (either in paper or electronic format) surrounding each hardship distribution.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
More Posts