Did Hardship Distributions Just Get Easier?

Anne M. Meyer • March 6, 2017

In a previous blog , we addressed an issue of Employee Plans News in which the IRS took the position that 401(k) plan administrators must maintain hardship distribution records and should not rely on electronic participant self-certification for hardship distributions.

On February 23, 2017, the IRS issued a memorandum to its Employee Plans Examiners that sets forth substantiation guidelines for the examination of 401(k) hardship distributions.  The memorandum provides that a plan administrator may maintain either of the following to establish a participant’s need for a hardship distribution: (1) source documents that support the need for the hardship distribution or (2) a summary of the information contained in the source documents.

Source documents include items such as the original health care bills, signed purchase agreements for the purchase of a principal residence, bills from an educational institution and similar documentation. The summary is designed to be a summary of the source documents.

The memorandum describes the content of the summary that a plan administrator must maintain as substantiation of a hardship distribution and it also sets forth what information must be provided to the employee requesting the hardship distribution. For example, the plan administrator must notify the participant that he/she must retain the source documents and make them available upon request.  The content of the notice and summary requirements are described more fully in an attachment to the memorandum.

The IRS memorandum marks a change from the position the IRS articulated in its prior informal guidance on this issue. It is welcome news for many plan administrators as it provides them with additional flexibility in their efforts to document requests for hardship distributions. However, it also seems clear that the IRS still does not countenance a participant’s electronic self-certification for hardship distributions without at least some substantiation.

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.
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