Hardship for medical expenses paid on credit card?

[jkharvey]

More than 6 mths ago the participant paid medical expenses with his credit card. Today he says he can't pay the CC and wants a hardship for these expenses. My gut is telling me that this won't fly as a hardship distribution. Plan document uses safe harbor hardship requirements. Thoughts?

[Guest jims]

I would not approve the hardship. These are now credit card bills, they are not medical bills. For hardship documentation, you will need to show an unpaid medical bill - and that is no longer true.

[Guest IndigoBlue68]

More than 6 mths ago the participant paid medical expenses with his credit card. Today he says he can't pay the CC and wants a hardship for these expenses. My gut is telling me that this won't fly as a hardship distribution. Plan document uses safe harbor hardship requirements. Thoughts?

I'm no accountant, but I would agree with jims. What I don't understand is, why would he pay with a CC, with intrest, for medical bills that could probably be paid with no intrest?

My husband and I had a big year in 2005, a second baby born, our oldest in Childrens Hospital 4 days (Juvinial Diabetes, spent 1 night in ICU) and finally my husband in the ER for chest pains (anxiety). We got a nice tax deduction off all the hospital bills we've had to pay on as well as no intrest paid out on top of the reg. payments. We did, however get a hardship off our 401k to help with some work we had to do on the home, but that was it. It was a tough year.

[QDROphile]

So many interesitng statements, but could you tell us more about a hardship distribution for "some work" on your home? That would not be a typical use for a hardship distribution.

[Guest IndigoBlue68]

So many interesitng statements, but could you tell us more about a hardship distribution for "some work" on your home? That would not be a typical use for a hardship distribution.

No problem. We where allowed to borrow towards an "addition", which was enclosing the carport to a garage/room. It was a very small amount (just over $4000). I did forget to mention, we where able to borrow a little also from the 401k a few years back in order to get a down payment on our first home. I know, not a smart move, but that was our only resource at the time. My husbands company was well aware of our intentions of using the money.

[Guest dbvail]

Interesting indeed. As a TPA we do not make this call, of course, it's up to the Plan Administrator. By way of advice, however, we can look to the plan document. The 'hardship' rules are there to offer a 'safe harbor' definintion of hardship, however, our documents allow for language to the effect of 'any other finacial need that is deemed to be a hardship by the Plan Administrator'. So absent the concern of arbitrary and caprecious granting (my neice gets on but you don't), if the plan gives discretion to the PA, then there is no problem. IMHO. Good luck.

[MARYMM]

Interesting indeed. As a TPA we do not make this call, of course, it's up to the Plan Administrator. By way of advice, however, we can look to the plan document. The 'hardship' rules are there to offer a 'safe harbor' definintion of hardship, however, our documents allow for language to the effect of 'any other finacial need that is deemed to be a hardship by the Plan Administrator'. So absent the concern of arbitrary and caprecious granting (my neice gets on but you don't), if the plan gives discretion to the PA, then there is no problem. IMHO. Good luck.

Kathleen uses the word "borrow" a couple of times when referring to her"hardship distribution" which leads me to wonder if it was actually a loan.

[JanetM]

I think Kathleen took a loan too. From the use of the word "borrow".