Hardship Withdrawal Request under final regs

I realize that the HS withdrawal regs expanded the money sources and include earnings in the amounts now available for hardship.  However, if the plan document still says "deferrals only' do they have to allow distributions from safe harbor monies, etc.  Or is that going to continue to be an optional choice?  I know they don't have to take loans anymore or stop the deferrals as in the past.  Just wondering what to tell this client.  

I don't have a link, but when I asked this of our TPA, I was told the sources were still an employer choice but including earnings was not.  We only allow hardship and loans from employee deferrals.  

I did just find it here: https://www.mercer.com/our-thinking/law-and-policy-group/irs-finalizes-hardship-distribution-rules.html  from Mercer (who I strongly trust!)

Expanded Sources of Hardship Distributions (QNECs and QMACs)
Hardship distributions can now be made from elective contributions, qualified nonelective contributions (QNECs), qualified matching contributions (QMACs) and earnings on these amounts. The preamble confirms that this includes QNECs and QMACs in safe harbor plans — both traditional safe harbor plans and qualified automatic contribution arrangements (QACAs). A plan may limit the types of contributions available for hardship distributions — plans that don’t already offer distributions from all these sources needn’t be amended to do so.

42 minutes ago, rr_sphr said:

I don't have a link, but when I asked this of our TPA, I was told the sources were still an employer choice but including earnings was not.  We only allow hardship and loans from employee deferrals.  

 

It's still early and who knows what other guidance we might get, but I disagree with your statement (what you were told) that earnings have to be included.  They do not.  Proper language (including existing  language that excludes earnings) is just fine.  Me, I will modify to include earnings (why not) but most likely NOT expand to the other sources.  We might have an occasional client that would want/need additional sources, but it will be a rarity. 

18 minutes ago, Larry Starr said:

It's still early and who knows what other guidance we might get, but I disagree with your statement (what you were told) that earnings have to be included.  They do not.  Proper language (including existing  language that excludes earnings) is just fine.  Me, I will modify to include earnings (why not) but most likely NOT expand to the other sources.  We might have an occasional client that would want/need additional sources, but it will be a rarity. 

I agree with Larry.  You are not required to include earnings under the final regs.  It is possible that a document provider decided to not offer that flexibility and instead defaulted to eanrings are included.

From the final regs, under the heading "Summary of Comments and Explanation of Provisions"

Quote

Expanded Sources for Hardship Distributions

Pursuant to section 41114 of BBA 2018, the final regulations, like the proposed regulations, modify existing § 1.401(k)-1(d)(3) to permit hardship distributions from section 401(k) plans of elective contributions, QNECs, QMACs, and earnings on these amounts, regardless of when contributed or earned.

Several commenters asked how the new distribution rules apply to safe harbor contributions made to a plan described in section 401(k)(12). Because safe harbor contributions made to a plan described in section 401(k)(12) are either QNECs or QMACs, amounts attributable to these contributions may be distributed on account of hardship. As noted in the preamble to the proposed regulations, safe harbor contributions made to a plan described in section 401(k)(13) may also be distributed on account of an employee's hardship (because these contributions are subject to the same distribution limitations applicable to QNECs and QMACs). See § 1.401(k)-3(k)(3)(i). However, a plan may limit the type of contributions available for hardship distributions and may exclude earnings on those contributions from hardship distribution eligibility.

another reason why i am not fond of my TPA......I 1000% trust Mercer!  I can't even get my TPA to give any thought or training to their own employees!

1 hour ago, rr_sphr said:

another reason why i am not fond of my TPA......I 1000% trust Mercer!  I can't even get my TPA to give any thought or training to their own employees!

There are other servicing firms; from your statement it sounds like you should be looking for a new one!