Hardship for Medical Expenses Not Yet Incurred

[Guest SWH]

Participant has submitted a preliminary consult bill for dental bills as a medical bill for supporting documenation on a hardship distribution. However, the previous telephone discussions with the participant have all been about expenses not allowed under IRS hardship reasons. The consult bill is dated the day after our telephone conversation.

I've never had a strectch on the "medically necessary" (as opposed the previously incurred) phrasing of the language before. The supporting documentation in no way shows that the participant is going back to get this work done, does not show that there is an immediate need, does not show an estimated treatment start date. Given the knowledge that I know, from telephone conversations, that the participant is more than likely not going to follow through with the dental procedures, don't I need to get more documentation to support the hardship? More of a commitment letter on the medically necessary since it is just a quote?

Any thoughts?

[MARYMM]

Participant has submitted a preliminary consult bill for dental bills as a medical bill for supporting documenation on a hardship distribution. However, the previous telephone discussions with the participant have all been about expenses not allowed under IRS hardship reasons. The consult bill is dated the day after our telephone conversation.

I've never had a strectch on the "medically necessary" (as opposed the previously incurred) phrasing of the language before. The supporting documentation in no way shows that the participant is going back to get this work done, does not show that there is an immediate need, does not show an estimated treatment start date. Given the knowledge that I know, from telephone conversations, that the participant is more than likely not going to follow through with the dental procedures, don't I need to get more documentation to support the hardship? More of a commitment letter on the medically necessary since it is just a quote?

Any thoughts?

Does the participant have dental insurance, an FSA or HSA or HRA that would cover this ? If so, I think you need an EOB showing the employee's portion and copies of the FSA/HSA/HRA account statements to demonstrate that there are not sufficient funds available there.

Does the dentist require payment in full prior to starting the procedures ? Can the hardship distribution check be made payable to the dentist ?

[Guest SWH]

No FSAs, etc. Participant only requesting half of the quoted amount -- which is his total account balance. I have not followed through to see if he has dental insurance, but with past experience, dental insurance, if applicable, would, at most, pay half, if that.

We've never paid a 401k distribution to any one other than a 401k participant. Can I even do that? What 1099 issues does that bring up? Could I make it payable to the Dentist FBO the participant? and then 1099 the participant as taxable? That's the only thing that I can think of? If fund company would even cut the check that way.

I have knowledge that conflicts with the documenation that the participant has supplied me so I feel like I need additional documenation to support the distribution request since the request is for an expense that the participant can walk away from. Can I require this?

I've only had one person go for the medically necessary before and we had no problem getting the "we're committed" paperwork" because the person was pregnant and paperwork said that fees were non-refundable, etc.

But I guess this brings up the whole question of what documentation is required when it is just a "quote" as opposed to a bill for services already incurred? For tuition, we require bills for already being enrolled -- in other words, some form of paperwork showing commitment.