Hardship Documentation Requirements

[khn]

A plan outsources hardship withdrawal administration to their recordkeeper. The recordkeeper requests and reviews participant documentation and provides approvals. Can this be considered sufficient for the plan sponsor retaining the necessary records? The records are available for them, they are just retained with their recordkeeper.

[GMK]

Two things that come to mind to check in the service agreement are who has what liability if the records cannot be produced for the auditor, and whether the complete set of records will be transferred when you hire a different record keeper.

Personally, I'd get copies for the plan sponsor's files, but that's just me.

[austin3515]

But as a practical matter, I'm sure the sponsor does not want to go to all that extra trouble, not to mention the service provider.

If it was me, I would have faith in the recordkeeper. The requirement is NOT that the plan administrator have the documentation, only that the rules are complied with. Unlike Fidelity's position (which relies on employee self-certification) I think as long as SOMEONE has the support and verifying compliance you are in the clear.

Odds are the recordkeepers record retention policies are better than the clients anyway.

[K2retire]

But as a practical matter, I'm sure the sponsor does not want to go to all that extra trouble, not to mention the service provider.

If it was me, I would have faith in the recordkeeper. The requirement is NOT that the plan administrator have the documentation, only that the rules are complied with. Unlike Fidelity's position (which relies on employee self-certification) I think as long as SOMEONE has the support and verifying compliance you are in the clear.

Odds are the recordkeepers record retention policies are better than the clients anyway.

I agree that recordkeepers are better at it, and that plan sponsor's don't want to do it. However it is ultimately the plan sponsor who is on the line for the information. If they have changed recordkeepers, it is going to be incredibly difficult to produce the records.

[austin3515]

As I often to say to Doctor clients "you incur more risk before noon each day" then we are talking about here...

[GMK]

I agree that it doesn't matter who holds the files as long as the plan sponsor can produce them when the auditor asks for them. Having my own folder of pdf copies is a personal preference, to ensure access. It is also a way to monitor the performance of the service provider ... but that's not the issue at hand.

So, check that the service agreement adequately protects the plan sponsor and move on.