IRS Issues Proposed Hardship Withdrawal Rules

Proposed regs released for Hardship Withdrawal changes made by TCJA and BBA2018.

Also includes relaxed rules for those affected by Hurricanes Florence and Michael.

https://benefitslink.com/newsletters/2018/2018_11_09_retirement_bulletin.html

If a plan’s sponsor delays plan amendments in response to these changes, how does a plan’s administrator—even if the employer, sponsor, and administrator all are one person—know which provisions to apply?

And if an employer puts something in writing, what stops the writing from being a plan amendment?

The TPA for whom I work is doing nothing until the regulations are final.  Right now they are just proposed. Relius can't prepare a document amendment, so for us, it's business as usual.

If a participant submits a claim that meets the conditions for a casualty-loss hardship except that it is not attributable to a disaster declared by the United States, do your employer/administrators deny such a claim?

And if they do deny it, does it bother them that one could, with a document, allow such a claim (even retroactively) with no meaningful risk that the IRS would treat this as an administration defect that tax-disqualifies a plan?

I suspect it will be like other 'proposed' amendment changes. you can operate in 'good faith' until the actual amendment is available. you can't use them until 1/1 anyway which is a month and a half away. I'm sure there will be more info available until then.

the proposed regs are effective for plan years beginning after 12/31/2018, they weren't published until November, and they take comments for 60 days which would be into the new year. so why give an effective date but take comments after that date?

(v) Effective/applicability date—(A) General rule. This paragraph (d)(3) applies to distributions made in plan years beginning after December 31, 2018. Except as otherwise provided in this paragraph (d)(3)(v), the rules in 26 CFR 1.401(k)-1(d)(3) (revised as of April 1, 2018) apply to distributions made in plan years beginning before January 1, 2019.

they also have  language for no more suspension of deferrals..

In light of the timing of the publication of these proposed regulations, the requirement to obtain this representation would only apply for a distribution that is made on or after January 1, 2020.

which to me says "we know we call these proposed, but basically they are good to go, but some don't have to be implemented until 2020"

If we recognize Tom Poje’s observation and others that assume the IRS won’t tax-disqualify a plan because its employer/administrator didn’t wait for a formal plan amendment and allowed something allowed under the proposed rule, why are some TPAs reluctant to meet some clients’ desire for the more lenient provisions?

Is it that doing so would be a pain-in-the-assets?

13 hours ago, Fiduciary Guidance Counsel said:

If we recognize Tom Poje’s observation and others that assume the IRS won’t tax-disqualify a plan because its employer/administrator didn’t wait for a formal plan amendment and allowed something allowed under the proposed rule, why are some TPAs reluctant to meet some clients’ desire for the more lenient provisions?

 

Is it that doing so would be a pain-in-the-assets?

Some are hesitant to do anything document related without a formal amendment from their document provider, even if they could operate in good faith based on the proposed regs.  As a more general observation, a lot of folks don't even want to get into the details of rules and regs until they are final. 

I think its partly the PITA aspect, but also that some are simply uncomfortable stepping outside clearly drawn lines. 

RBG, thank you for your observation; it helps me.