Search Blog
Subscribe Today
About this Blog
Welcome to the Snell & Wilmer Benefits Blog. We will be posting about current employee benefits and executive compensation topics and issues. We invite you to contact the authors with your thoughts or questions.Blog Contributors
Topics
Useful Websites
IRS Publishes 2019 Required Amendments List
In our 2019 End of Year Plan Sponsor “To Do” List (Part 3) Qualified Plans, we suggested that sponsors of all qualified retirement plans should be on the lookout for the Internal Revenue Service’s (“IRS”) 2019 Required Amendments List (“2019 RA List”). The IRS recently published Notice 2019-64, which contains the 2019 RA List, https://www.irs.gov/pub/irs-drop/n-19-64.pdf.
Part A of the 2019 RA List addresses changes in qualification requirements that require amendments to most plans (or to the types impacted by the change). The 2019 RA List contains two changes in Part A: those required by final regulations regarding hardship distributions and those required by final regulations regarding collectively bargained cash balance/hybrid defined benefit plans. Read More ›
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged 2019, cash balance, hardship, hybrid defined benefit, Part A, Part B, RAL List, Required Amendments 2019, Required Amendments List
Share this Article:
IRS Issues Final Regulations for Hardship Distributions
We previously reported on the Bipartisan Budget Act (the “Budget Act”) hardship distribution rule changes for qualified retirement plans. On September 23, 2019, the IRS issued final regulations implementing certain statutory changes to the hardship distributions rules, including those required by the Budget Act. The final regulations closely track the proposed regulations issued in November 2018. The following are some of the more significant changes implemented by the final regulations:
- Employers must remove the six-month suspension of a participant’s plan contributions following a hardship distribution occurring on or after January 1, 2020.
- Participants may receive a hardship distribution without first requesting a loan from the plan.
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged amendment, bba, Bipartisan Budget Act, distributions, hardship, natural disasters, qualified plan, withdrawals
Share this Article:
Congress Eases Restrictions on Hardship Distributions
We previously reported on certain changes made to the hardship distribution rules for qualified retirement plans by the Tax Cuts and Jobs Act. Since then, Congress has made additional and significant changes to those same hardship distribution rules by the passage of the Bipartisan Budget Act (the “BBA”). The BBA loosens various restrictions on a participant’s ability to request and receive a hardship distribution. In particular, the BBA provides:
- Effective for plan years beginning after December 31, 2018, participants may receive hardship distributions comprised of employee elective deferrals, employer contributions and earnings on both. Traditionally, hardship distributions were limited to employee elective deferrals and did not include qualified nonelective contributions, qualified matching contributions, safe harbor contributions or earnings on the same.
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged Bipartisan Budget Act, BPA, distributions, hardship, hardship distributinos
Share this Article:
Hardship Distribution Changes – Tax Reform May Have Unintended Consequences
When tax reform proposals were floating around in the fall of 2017, several early proposals to the Tax Cuts and Jobs Act (the “Act”) included changes to the hardship distribution rules for qualified retirement plans. However, the final version of the Act did not make any direct changes to hardship distributions. Nevertheless, the Act, perhaps unintentionally, made a significant change to the circumstances under which a participant can request a hardship for a personal casualty loss.
Personal Casualty Loss
The Act changed to the definition of a “personal casualty loss” under Section 165 of the Internal Revenue Code (the “Code”). Under the revised definition of 165, a personal casualty loss is only deductible if it is attributable to a federally declared disaster (i.e. Read More ›
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged casualty loss, hardship, hardship distributions, Internal Revenue Code, IRS, tax reform
Share this Article:
IRS Issues Hurricane Harvey Relief
In Announcement 2017-11, the IRS relaxed standards for hardship distributions and loans from qualified retirement plans for those affected by Hurricane Harvey. This relief applies to employees or former employees and their family members who live or work in the disaster areas designated for individual assistance by the Federal Emergency Management Agency (“FEMA”).
The Announcement provides for the following relief:
- Relaxes the administrative rules that apply to hardship distributions by permitting plan administrators to rely on a participant’s representations regarding the need for, and the amount of, the hardship distribution unless the plan administrator has actual knowledge to the contrary.
- Permits hardship distributions for Hurricane Harvey-related needs for family members, including parents, children and spouses.
Posted in Employee Benefits
| Tagged contributions, distributions, hardship, harvey, Hurricane Harvey, IRS, loan, relief, six-month delay
Share this Article:
Did Hardship Distributions Just Get Easier?
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. Read More ›
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged e-certify, electronic, Employee Plan News, Employee Plans Examiners, hardship, hardship distributions, IRS, self-certification
Share this Article:
Electronic Self-Certification for Hardship Distributions is Not Sufficient
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. Read More ›
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged electronic self-certification, hardship, hardship approval, hardship distributions, IRS, qualified retirement plans
Share this Article: