Our SPD does not specifically state that a medical expense needs to be unpaid, but rather only states it needs to be unreimbursed. As such, can you deny a hardship distribution for paid unreimbursed medical bills?
Our applicant submitted proof of $30k in recently paid medical bills along with EOB's showing no reimbursement from insurance. His Doctor requires 100% cash/credit card payment at the time services are rendered and requires patient's file their own insurance claim for reimbursement after the visit. We confirmed that this is their payment policy.
In this case, our applicant had to pay for all his medical expenses in full or forgo treatment. Our plan administrator denied his hardship distribution request since his medical bills, although unreimbursed, have already been paid. Is it legal and/or justified for us to deny his hardship distribution in this rare type of situation?
It seems like we are discriminating against cash pay patients by not allowing them access to their 401(k) just because their expenses are paid. He claims to have paid the bills by completely exhausting his entire savings account, which has created an immediate and heavy financial burden as he is still receiving medically necessary ongoing treatment as confirmed by the recent letter from his physician. How would you handle this?
Thank you,
Peggy
