Hardship for Medical Bills and Workmans Comp Claim

[Guest SWH]

Have a participant in a plan that was injured on job. He has filed for a hardship distribution from the 401k Plan for the medical bills that resulted from this injury. Foresee that the bills will be paid, but the case is in review right now. Insurance company being especially careful since he has obtained a lawyer. (Don't know all the details of that, don't really want to know. )

Plan uses safe harbor definition of expenses and the safe harbor test for establishing financial need.

Safe Harbor Test for financial need says that if ALL the following requirements met that we do not need to consider factors like you would in the facts and circumstances test or obtain the employee's written representation that no other sources available to pay expenses

1. Distribution does not exceed the amount of financial need.

2. EE received all other distribution from all other plans maintained.

3. EE will suspend deferrals for 6 months.

So, normally I don't even consider whether they have other funds available other than looking at documenation to determine what portion insurance is expected to cover (or is covering).

Since employer has knowledge that there is a pending workmans comp claim, can we still make a distribution on the medical bills presented?

I've talked myself in a circle here. Any help or thoughts would be greatly appreciated!

[GBurns]

Is this person facing eminent legal action regarding the payment of these bills, or is it just theiirdesireto pay?

Desire to pay should not constitute hardship nor need..

[Guest SWH]

My impression was that this was a very recent event, but I am trying to find out the answer to that question myself. FOr sake of argument, assume just a desire to pay. WHen using the safe harbor definition and test, does it make a difference that there is a workman's comp claim pending?