403b hardship

[Carike]

A client issued a hardship but payroll failed to suspend their contributions for 6 months. They have not (yet) adopted the amendment to dispense with this requirement and have issued other hardships where the contributions were suspended appropriately.  What is the recommended remedy/correction for the Plan Sponsor in this situation?

[Luke Bailey]

Assuming the individual is not an HCE (or that the plan sponsor is a governmental entity and therefore exempt from nondiscrimination rules), how about adopting a discretionary amendment before end of plan year stating that this named individual does not have the 6-month suspension in 2019?

[ratherbereading]

From the IRS https://www.irs.gov/retirement-plans/correct-common-hardship-distribution-errors

[LANDO]

Luke, are you saying that a plan must adopt a plan amendment by the end of the year?  Aren't we waiting on the IRS to tell us what the amendment deadline for early adopters of the final hardship regulations are...at least with respect to IRS Pre-approved documents?  I don't think it would hurt to amend a plan to eliminate the six month suspension early, but preferably those of us that use mass submitter documents would prefer to wait till our vendors come up with interim amendments.

[Luke Bailey]

1 hour ago, LANDO said:

Luke, are you saying that a plan must adopt a plan amendment by the end of the year?  Aren't we waiting on the IRS to tell us what the amendment deadline for early adopters of the final hardship regulations are...at least with respect to IRS Pre-approved documents?  I don't think it would hurt to amend a plan to eliminate the six month suspension early, but preferably those of us that use mass submitter documents would prefer to wait till our vendors come up with interim amendments.

So Lando, I'm going to assume calendar year plan for simplicity. As I understand it the idea would be to, say, keep the suspension for everyone else through the end of 2019, or at least through 10/31/2019, but to have the plan say it didn't apply to this one individual, who is an NHCE. Maybe you could include that amendment later, when you do your remedial amendment by the extended deadline, on the basis that this is integral. I'd have to study. Probably safer to adopt the rifle-shot amendment for this one guy now. I'd have to give this more time to reach a decision on that. Was just trying to help out Carike on the basic approach.

[LANDO]

Gotcha Luke.  I took the original post to mean they only had one hardship and they didn't suspend deferrals. If this is the only hardship taken in their plan year beginning in 2019, and they don't suspend for anyone going forward, they should be okay waiting for interim amendments to become available. At least pending further guidance from IRS.