GoFundMe mitigating hardship?

[AlbanyConsultant]

We were about to tell the plan sponsor that the hardship paperwork they had sent to us looked in good order when one of our admins stumbled upon a GoFundMe page set up for the specific purpose of paying the bill that the hardship was submitted for.  A very well-supported GoFundMe page.

If we tell the Plan Administrator, they're just going to ask us what this means, and should they approve it or not.  On the one hand, one could argue that there is no longer a financial need.  On the other, there's no real proof that this was set up by the participant in question and that the money will actually get to the participant (internet scams abound).  The hardship form does have a certification that the participant has no other funds with which to pay this bill, and this was signed by the participant.  Maybe it was signed before the GFM page was created, or maybe it wasn't fully-funded at the time so they were looking to make up the rest via the hardship; I don't know.

Our consensus is that no auditor would look this far into the situation - they would review the distribution form and the payment in the light of the [proposed] regulations and everything would be fine.  No IRS agent is going to do an Internet deep dive on this - at least, I don't think it will be in their training in the next three years.

Anyone already think through this and come up with a policy?  Thanks.

[rr_sphr]

I'd probably have the plan administrator broach it with the employee as part of the interactive process. If they claim ignorance, they should at least be told that the GFM exists.  As to whether the employee pulls their request?  If there is solid documentation, I agree that I doubt the IRS will dig that far even in an audit

[llkmrw]

I think you should just focus on the hardship request and your normal process and approve it if it is eligible per the Plan requirements.  If you deny the request and the same issue comes up later on with a different participant and the GOFUNDME page isn't discovered, it could look like discrimination.  Plus, you will be setting a presidence for reviewing requests in the future.  I would let the IRS determine anything fraudulent when the particpant files their taxes. 

[BG5150]

Does this plan use "facts and circumstances" or the "safe harbor" reasons for hardships?

[AlbanyConsultant]

On 2/28/2019 at 8:42 AM, BG5150 said:

Does this plan use "facts and circumstances" or the "safe harbor" reasons for hardships?

F&C

[BG5150]

If the participant has access to other funds under the F&C program, then I think the hardship should be denied.

[BG5150]

From the 1.401(k)-1 regs:

(B)No alternative means available. A distribution is not treated as necessary to satisfy an immediate and heavy financial need of an employee to the extent the need may be relieved from other resources that are reasonably available to the employee. This determination generally is to be made on the basis of all the relevant facts and circumstances. For purposes of this paragraph (d)(3)(iv), the employee's resources are deemed to include those assets of the employee's spouse and minor children that are reasonably available to the employee. Thus, for example, a vacation home owned by the employee and the employee's spouse, whether as community property, joint tenants, tenants by the entirety, or tenants in common, generally will be deemed a resource of the employee. However, property held for the employee's child under an irrevocable trust or under the Uniform Gifts to Minors Act (or comparable State law) is not treated as a resource of the employee.

source:  https://www.law.cornell.edu/cfr/text/26/1.401(k)-1

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