Hardship request and power of attorney

[cpc0506]

Employee A has money in a company 401k plan. Employee A is severely injured in a car accident. Husband of Employee A has power of attorney. Can husband request a hardship distribution from the company 401k plan to pay medical bills using his power of attorney?

[Peter Gulia]

What, if anything, does the plan's document say about the circumstances in which the plan's administrator must, may, or must not recognize a participant's agent?

If the plan's document is silent or ambiguous, what does the administrator's plan-administration procedures states?

What does the plan's claims procedures state?

What does the plan's summary plan description state?

Has the plan's administrator read the participant's power-of-attorney document to discern which powers it grants the would-be agent?

[MoJo]

I would suggest looking first at the POA. A properly drafted POA *makes* the agent the equivalent of the individual for those purposes spelled out in the POA, and the plan (usually) will have to honor the directions of the agent *as*if*they*were*the*participant.

When in doubt, contact ERISA counsel....

[My 2 cents]

Too bad that their health insurance is not making financing the needed medical care a non-issue! That is why they have it (they do have health insurance, right?).

[Lou S.]

Too bad that their health insurance is not making financing the needed medical care a non-issue! That is why they have it (they do have health insurance, right?).

It's too bad that all too often the health care system in the USA sucks balls with respect this issue. But that's really not relevant to the OPs question.

[Belgarath]

And assuming the POA is acceptable and the plan otherwise permits (which I expect it does) the hardship distribution still can't be made if the medical bills can reasonably be paid from other sources, etc. - the usual...

[mphs77]

and remember, if the Plan has a loan provision, a loan must be taken first....

[cpc0506]

Plan does not allow for loans. But if it did, would you allow an employee to take a loan when the likelihood of repayment is slim to none, if employee is unable to work.

[My 2 cents]

Too bad that their health insurance is not making financing the needed medical care a non-issue! That is why they have it (they do have health insurance, right?).

Granted that this is only indirectly related to the original post, but have you seen the news story today about John Oliver? After investigating the "industry" that buys and sells medical debts, his show bought $15 million worth of outstanding medical debts (accumulated by 9,000 Texans) for $60,000 (i.e., for $60,000, they bought the right to harass thousands of people and work to collect on outstanding medical debts that totaled $15 million). And then the show forgave the debts (in a way that did not create a big tax liability for the 9,000 Texans whose debt had been purchased). 9,000 rescued people.

Sticking people who need medical care with the responsibility for paying for it, without regard to their ability to pay, is morally unacceptable. One does not choose to go into deep debt for medical care that is not necessary. And those people who buy, at a deep discount, the debts generated when other people need medical care they cannot afford, in order to reap enormous profits from them, are truly evil.

Virtually every other developed country on earth has a better way of financing medical care than we do. How much of the portion of the GNP going for medical care is wasted on billing, let alone diverted into profits? Whether our medical care system is better at causing misery than it is at alleviating it is a question that needs to be seriously considered.

[Peter Gulia]

That a factor can buy these receivables at a price of four-tenths of one penny on the dollar might teach us something about the quality of the ostensible "debt".

[My 2 cents]

So if someone owes $75,000 because of a 2 week hospital stay, and the sorry excuse for a human being buys it for $300, if they can squeeze $500 out of the debtor or the debtor's family, that's a 66% gain on the investment. If they can get the person to settle for an entire cent on the dollar ($750), then the profit is 150%. And if the debtor agrees to pay 10%...

That this even exists tells us something about humanity.

[My 2 cents]

That a factor can buy these receivables at a price of four-tenths of one penny on the dollar might teach us something about the quality of the ostensible "debt".

Please be sure to distinguish the quality of the debt for someone overreaching to buy a house that they cannot afford from the quality of the debt for someone who needed more medical care than they could afford.

If someone wants a house but doesn't have the resources to afford it, active malfeasance on the part of the lending company is required (since they know full well that the mortgage would be unsupportable). If the person looking for a house is made to understand their financial limitations, they can choose to not try to buy the house.

If someone needs an operation, there is no alternative to getting that operation. With the possible exception of the operation being needed due to extremely poor choices adversely affecting the person's health (and even then, it is inhumane to use that as an excuse to not provide them the care that is now needed), there is nothing the person could have done to avoid the necessity of obtaining the operation. In the original post, if the employee did not cause the accident, the financial bind is not her fault, and destitution (or even decimation of her retirement savings) is not appropriate.

[Peter Gulia]

My 2 cents, I was generally agreeing with your observations in post #9.

That a factor can buy a receivable so cheaply might suggest that it ought never to have been regarded as an obligation, much less a debt.

I know many people who have the good sense to ignore the collection efforts. You're right that it's a shame that anyone should have to deal with the circumstances you describe.