Impermissable Distribution in a Safe Harbor Plan

[TPAVP]

An employee received a "hardship distribution" in 2012 from non-SH Match and non-SH non-elective sources. The plan allows hardships from deferrals only. This is a Safe Harbor plan. What would be the preferred correction? Is there an allowable retroactive corrective amendment? VCP?

[Jim Chad]

FWIW I think you could self correct with corrective amendment.

[TPAVP]

In what I've read in EPCRS, I think I agree that we could prepare a corrective retroactive amendment. However, I'm having a hard time reconciling that with the fact that the plan is Safe Harbor, which has mid year amendment restrictions. It's almost to say that you are punished by trying to do the right thing but if you screwed up, don't worry cause we can retroactively amend it!

[MoShawn]

One of the express exceptions to the mid-year amendment rule for Safe Harbors is to add hardships, I believe.

[TPAVP]

One of the express exceptions to the mid-year amendment rule for Safe Harbors is to add hardships, I believe.

I thought the exception was to expand the hardship provisions to include the PPA language

[Kevin C]

There are several threads with discussions on mid-year amendments to safe harbor plans. My suggestion is that you read the published guidance and the discussions here. Then, you will have to decide how you want to proceed. ASPPA's position on mid-year amendments changed somewhat at the 2012 Annual Conference. We'll see what it is now in about a month at the 2013 Annual Conference.

You won't find anything in the published guidance that says you can't amend to add hardship distributions mid-year. EPCRS has a correction method for improper hardship distributions that involves a retroactive amendment. If it were me, I would correct under SCP and move on.