Hardship Distributions

[Guest bostonborn]

We have a large plan with demographics that are really tough...no phones, no computers, no access to a fax, etc. Would anyone see issues with taking hardship requests over the phone on a recorded line. The participant would be told the available circumstances for hardship and asked which one applied, etc.

Appreciate anyones thoughts

[WDIK]

How would you propose to take hardship requests over the telephone when you also indicate that there are "no phones" for this demographic?

(Would it be correct to assume that you are currently using the postal service?)

[Guest bostonborn]

lol, sorry...they have phones. Just not computers, email, faxes. Most of the time they are using a foreman's cell phone while working out on a job. Right now its a mess, we have to mail them paperwork and they mail it back...it takes forever and these guys are really in need (can you tell by the demographics?) We are faxing stuff to Office Max or Staples, then they dont get it, and we have to re-fax or even go so far as to drive it over to them. Its a mess and we are looking to try to use recorded lines in place of paper.

[oriecat]

2 questions:

What does your plan document say about the procedure for requesting a hardship distribution?

Is there some reason these people can't come into the office and fill out the form? How far away are they?

[masteff]

I was mulling this over since it was first posted and came up w/ a few thoughts...

Fidelity's plan services will initiate requests via phone but the participant still has to sign the form and submit it either to the plan sponsor or Fidelity (depending on level of service).

The issue I see is that the plan sponsor still has to document the hardship reason. The participant has to send in some type of substantiation. (Guess that depends on what type of substantiation your plan requires; whether it's more than just a statement of need. Though I seem to recall that a stmt of need alone is insufficient.)

So I can see taking the initial request via phone to streamline the process, but I can't see by-passing some type of paperwork.

Best case I could see would be using the phone recording in lieu of a signature on the form, but participant would still have to submit supporting documentation to the extent it's required (eliminating papers from benefits dept-to-participant, but not from participant-to-benefits dept).

NOTE: If any portion of a withdrawal is rollover eligible (such as an in-service w/drwl combined w/ a hardship), then the requirements of 402(f) apply and you then have the added step of providing the special tax notice on rollover eligible distributions.