Hardship Suspension Rules

[Guest MK RPS]

Does anyone know if you establish suspension rules/conditions, after allowing hardship distributions, in a 403(b) plan with mandatory employee contributions if you can allow suspension of the employer matching contributions ONLY - but not suspend the employee contributions? Is this possible? In this case assume that hardship distributions are allowed from only the employee mandatory or could also be allowed from both the employee mandatory and employer matching.

I also assume the suspension of either elective deferrals or employee contributions (voluntary/mandatory) in a 403(b) plan follows the 401(k) regs./rules for the same issue and that during the 6 month hardship period - suspension is based on the safe harbor hardship rules being in play, correct??

When is the suspension rule not in play during operation/administration of a 403(b) plan?

[masteff]

Unless I'm really missing something, it's a trick question. You state "mandatory employee contributions". Hardship suspension applies to "elective deferrals". "Mandatory employee contributions" are not "elective deferrals".

[My 2 cents]

Don't work on 403(b) plans. Can 403(b) plans have mandatory employee contributions?

[masteff]

Made me look! This thread touches on a few of the nuts and bolts of mandatory employee contributions:

http://benefitslink.com/boards/index.php?/topic/37502-mandatory-deferrals/

[Guest MK RPS]

Yeah...mandatory EE contributions are after-tax more or less, but not of the Roth variety. So suspension of deferrals and/or ee contributions is allowed, but via plan design can the ER match be suspended and not the deferral or EE contribution that allows the match?

[BG5150]

I thought the point of suspending someone from making deferrals after a hardship was: if you have to dig into your account for funds, how can you afford to make deferrals?

So, stopping just the match doesn't really fit the bill.

Plus, the suspension is not meant to be a penalty. Suspension of just the match would also be a penalty.

[masteff]

Yeah...mandatory EE contributions are after-tax more or less, but not of the Roth variety. So suspension of deferrals and/or ee contributions is allowed, but via plan design can the ER match be suspended and not the deferral or EE contribution that allows the match?

Okay... two separate issues:

1) suspension of EE contributions

2) suspension of ER match

1) Since it's a mandatory contribution, not an elective deferral, then you do not have to suspend the EE contribution.

2) Suspending an ER match has nothing to do with the hardship rules. I think you inadvertently distracted the discussion w/ that bit. I suggest you look at 401(a)(4) and 401(m) as they apply to 403(b) plans. The question to me is: can you ever suspend a match for an individual participant, such as for withdrawal of mandatory ee contributions?

[Guest MK RPS]

I thought the point of suspending someone from making deferrals after a hardship was: if you have to dig into your account for funds, how can you afford to make deferrals?

So, stopping just the match doesn't really fit the bill.

Plus, the suspension is not meant to be a penalty. Suspension of just the match would also be a penalty.

Hi BG 5150....to your point and well more specifically as stated in ERISA Outline Chapter 6.

"What is the purpose of this rule? Through this requirement, the IRS is hoping

that an employee would weigh the retirement consequences of missing deferrals for this

period of time (and related matching contributions, if applicable). The employee might be

encouraged to find other means to meet the need, if possible. In addition, an employee might

consider the additional income he will receive during the suspension period and possibly

elect a smaller hardship withdrawal."

So to me the answer appears to have been ruled down to the only time we suspend matching is when the plan allows for hardship of matching accounts & the safe harbor rules are in effect, then if we suspend the deferral and as a result the matching can NOT occur if nothing to match taking on the disguise of also being suspended. And, well that means if we do not suspend the EE mandatory, then the match will still occur as hardship rules do not allow suspension of any ER amounts.