Hardship Distribution Suspension Period

[austin3515]

Is an employer required to notify a participant when/if the 6 month suspension period is up?

I'm curious to hear how others are treating this.

[JanetM]

We reinstate the deferral percentage that was in place before suspension. That is what they elected so once the suspension is over deferrals restart. Participants are notified of suspension and reinstatement when they take the hardship.

[Peter Gulia]

Whichever a plan provides - resuming a 401(k) election once the required sitting-out period has expired, or treating a claim for a hardship distribution as including an election for "cash" compensation until the participant "affirmatively" and expressly elects to restart 401(k) contribution, it would be smart (and might be required) to explain this provision in the summary plan description. Further, a plan administrator might have a better answer to "why didn't you tell me" if an explanation of this provision is on the form by which a participant claims a hardship distribution.

[austin3515]

If I wrote plan documents, that's what I would say!! But the document just says "deferrals must be suspended for 6 months."

[JanetM]

I would do CYA letter to participant telling them deferrals will or will not restart. Then it is up to them to do something.

[austin3515]

We were actually just tossing around the idea of including to the hardship form as part of the notice that deferrals will be suspended for 6 months.

Thanks!

[masteff]

Is an employer required to notify a participant when/if the 6 month suspension period is up?

We had a whole period of time where letters didn't go out because the TPA's programming was slightly messed up and we certainly never concluded notification was "required" (denoting to me that IRS or DOL or plan language mandated it). I do agree w/ Janet's CYA comment.

Also important is that a letter can help keep participation numbers up.

To fix our mess, we recompleted the TPA's questionaires for the suspension service. They offered three flavors at end of suspension: restart at prior %, restart at a set % (such as fully matched %), or leave at zero and require EE to take action. In all cases, had the option to send a letter. We left participants at zero w/ a letter going out about a week prior to end of suspension.