Should a 403(b) plan’s sponsor/administrator make its own hardship form?

[Peter Gulia]

 

A university maintains an ERISA-governed § 403(b) plan, and is the plan’s administrator.

 

The plan allows a choice of three investment vendors—TIAA-CREF, Fidelity, and Vanguard.  The plan has no common recordkeeper; each vendor keeps records to the extent a participant uses the vendor’s annuity contract or custodial account.

 

The plan provides hardship distributions, using only the Treasury rule’s deemed needs.

 

The university asked me to write a form on which a participant would specify which of the deemed needs is the claimant’s reason for the requested hardship distribution.  The university knows a vendor has its forms, yet asks for this form besides the vendors’ forms.  Completing this form would not relieve a participant from completing her vendor’s form.

 

Is a plan-level hardship form a good idea or a bad idea?

[Bird]

2 hours ago, Peter Gulia said:

Is a plan-level hardship form a good idea or a bad idea?

It depends.  If we feel a vendor form is inadequate or confusing, and we or the sponsor can process distributions without a participant signature, then we'll use our form.  Otherwise we'd use the vendor form.  I think there might be a plan or two where for various reasons, we have to get two forms signed, but I try to avoid that redundancy and irritation to the participant.

[Peter Gulia]

Thank you for your helpful perspective.

Is a vendor's hardship form one you consider inadequate?

[JOH]

Not sure why the university would want their hardship form instead of just using the vendor's form.  That would require university start tracking regulatory updates and making updates to the hardship form (extra work when they are already paying the vendor to do the work).  Also, the vendor would require their own form completed and signed (since most forms have an indemnification clause indemnifying the vendor and reliance about the truthfulness of the signer).  Seems like it would cause more work for the participant and the university.

[Peter Gulia]

JOH, I suggested to the requesting officer that it might be unwise for the university to spend its money (no matter how inexpensively I would do the task) if the vendors’ forms are adequate.  Further, even if I would write the form as a freebie, I’m still thinking through potential disadvantages.

 

While I’m waiting for information about why the university might want a distinct form, I seek BenefitsLink neighbors’ observations about whether it’s a good idea or bad idea.

 

Beyond a claimant’s burden of filing-out duplicate forms (and the employer/administrator’s burden of reviewing duplicate forms), is there some other disadvantage to using a form besides the investment vendor’s form?

[Bird]

On 6/26/2020 at 2:26 PM, Peter Gulia said:

Is a vendor's hardship form one you consider inadequate?

Depends.  Sometimes they don't even ask the reason.  Sometimes they ask more than needed and create confusion.

[Peter Gulia]

Bird, thank you for your further observation.

I too often see forms that use extraneous text, and ask for more items of information than is needed to decide the claim.

[BG5150]

Potential disadvantage:  You are bound to get conflicting information between the two forms (I want 10%/no withholding, I want my full account/$4,500, eg).

Potential disadvantage:  Even though you have a captive audience, the participants may get annoyed at having to fill out two forms.

Potential disadvantage:  Possible delay in processing due to needing to different forms in good order.

Potential disadvantage:  Storage of both sets of forms, and trying to keep them togther.

 

[Peter Gulia]

BG5150, thank you.