Must a provision for a self-certifying hardship be in the plan document?

If a plan sponsor wants its plan to provide that a hardship is determined by relying on the claimant’s certification (to the extent I.R.C. § 401(k)(14) or § 403(b)(7)(D) permits):

Must or should that provision be stated in the plan documents?

Or is it enough that the plan’s administrator’s claims procedure, distinct from the plan documents, states the self-certification regime?

Also, even if a procedure would be enough, is there any disadvantage to putting the provision in the plan documents’ adoption agreement?

I welcome all BenefitsLink neighbors’ views.

From my perspective as a QDRO preparer there is the problem.  It is not unusual for Participants in defined contribution plans to do everything imaginable to reduce their account balance and thereby reduce the amount that will ultimately become payable to their soon-to-be former spouse Alternate Payees.  They will, for example:

(i) retire and roll over the entire amount in their account to an obscure bank (or banks) in the middle of Nowhere, Wyoming, and move it from bank to bank to avoid collection efforts, or perhaps they will distribute the entire balance, pay the least amount of taxes withholding they can get away with, and hide the money in the Royal Bank of Tierra del Fuego or in their broker-in-law's corporate savings account in a bank in Vancouver; or

(ii) they will take a maximum loan (not to exceed $50k); or,

(iii) they will make a hardship withdrawal. 

From the perspective of the Alternate Payee it is not helpful to make it easy for the Participant to make a hardship withdrawal by "self-certifying".   You probably will not believe this, but PEOPLE LIE!  Even fraudulently and under oath and under the penalty of perjury and despite warnings that lying is a felony.   

People who fill out online applications for retirement from the Federal Government will click the box that says "unmarried".  Members of the Military will find a friendly doctor who will give them a 100% disability rating and deprive the Former Spouse from receiving disability income that not be classified as marital property divisible in divorce. [The foregoing is a little more complicated but I didn't want to get down in the weeds and throw out a lot of acronym like CRSC or CRDP.]

I am pretty sure that you cannot you cannot permit self-certification unless it's in the Plan Documents. But if self-certification is not permitted, then the Plan Administrator has to decide whether the alleged "hardship" is legit and expose themselves to being sued by the prospective Alternate Payee to whom the Plan Administrator owes a fiduciary duty if they make the wrong call.  So if you are going to permit self-certification, and if you put that in the Plan Documents, how about required notice to (and consent by?) the spouse who then will have the burden of filing a Notice of Adverse Claim/Interest, and asking the Court where the divorce is pending to enjoin the hardship withdrawal, and giving actual notice to the Plan Administrator that will likely be told my their attorney to do nothing until the parties agrees or the court rules. 

David 

I don't believe there is a provision in the hardship regulations that states that a plan “must provide” that self-certification is permitted for an administrator to rely on a participant's representations.

Thus, if a plan simply permits hardship distributions and does not require a different substantiation method, the administrator can ordinarily use self-certification operationally without a specific plan provision authorizing it.  However, if a plan’s governing documents (e.g., the plan document, SPD, and/or incorporated administrative hardship procedures) require documentation or substantiation, operating solely on self-certification would cause an operational failure.

So, self-certification need not be expressly authorized but using it cannot contradict the plan’s existing substantiation requirements.

If the client desires self-certification, our approach, ultra conservative, is to include explicit language in the plan document, the SPD and other hardship procedures to permit self-certification and, by doing this, we will review all the "relevant" documents to ensure they are consistent (and inconsistent language shouldn't exist).

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