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hardships tied to financial wellness program participation


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A client has recently asked if they can require participants to enroll in their financial wellness program as a condition of receiving a hardship distribution from their retirement plan. It seems like a great idea to me, but I have no idea if it is allowed.

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Is the client requiring the participant to complete this program before they will consider an H.D. or does the person just have to enroll?  What happens if they enroll but don't complete the program?  What if they complete the program but don't follow any of the recommendations?   What if the participant is the client's CFO?  See where this is going?

I would advise the client that they may think it's a good idea, but it will cause administrative difficulty, be hard to set-up and to enforce, and be considered insulting by many employees. 

 

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18 hours ago, K2retire said:

A client has recently asked if they can require participants to enroll in their financial wellness program as a condition of receiving a hardship distribution from their retirement plan. It seems like a great idea to me, but I have no idea if it is allowed.

Are they using safe harbor hardship rules (I bet they are).  Let's assume that is the case.  The employee has a RIGHT to the hardship distribution under the terms of the plan.  Adding another provision is a violation of their ERISA rights.  So the answer is NO, they cannot require it.

Now, for a non-safe harbor, I think the answer is still the same, but I'm not sure that they couldn't write the provision into the plan's hardship provision (non-safe harbor).  But I would surely NOT do so and I don't think it is a good idea.  What does financial wellness have to do with buying a house? Or unreimbursed medical expenses? etc?

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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