Qualified Birth and Adoption

Plan includes the QBAD provisions.  Apparently these distributions are subject to self-certification.  Is there a provison that says soething like "unless the plan administrator has actual knowleddge to the contrary"?

Just curious what the standard for verification is on these QBAD's?

Notice 2020-68, Q&A D-12

Quote

Q. D-12: May a plan sponsor or plan administrator rely on a reasonable representation from an individual that the individual is eligible for a qualified birth or adoption distribution?

A. D-12: Yes. In making a determination whether an individual is eligible for a qualified birth or adoption distribution, a plan sponsor or plan administrator of an applicable eligible retirement plan is permitted to rely on reasonable representations from the individual, unless the plan sponsor or plan administrator has actual knowledge to the contrary

This is interesting.  So a woman in a small office asks for a distribution and self certifies...  The sponsor obviously has actual knowledge concerning a pregnancy.  I guess she could have adopted after all, but boy does this raise the "actual knowledge to the contrary" standard or what?  Even in the case of an adoption, you would think HR would know one way or the other if that happened.  And that's probably true all the way up to an organization with a couple hundred people...

I guess the dudes have an advantage here (at least the fraudulent ones 😁)...

Besides adoption, it's also possible that an employee might be pregnant and not show it. Not everyone carries a pregnancy the same way.

Your female employee might also be married to a woman who is the one who gave birth.

If you've got two employees, one male and one female, and they both come in and request a QBAD with identical self-certifications in hand, and you approve the man's request (because you have no reason to deny it) but deny the woman's request (or demand additional substantiation), merely because you think she hasn't looked pregnant at any time in the last year, then I think you have a sex discrimination issue.

I know we usually think that everyone knows everyone else's business in a small office environment, and sometimes that is the case, but not always. Unless the employee wants to add the newborn or adopted child to their employer-sponsored benefits, there's no reason they would even need to inform HR.

Finally there is the epistemological question of what it means to have "actual knowledge." 

Well, I of course only speak from life experience and everyone who I knew who gave birth there was no hiding it.  So hopefully my matter of fact assessment did not convey anything beyond generalities.  I think it would be pretty widely accepted that if a woman took a QBAD there would be no need for any further investigation regarding the fact that she gave birth in 97.5% of the cases..

austin3515, don't look a gift horse in the mouth, and don't ask or tell. The "no actual knowledge to the contrary, without a duty of inquiry" standard may seem light, but it is just for purposes of protecting the plan from disqualification and helping plan administrators avoid what would otherwise be a very fraught, intrusive inquiry of their employee. If the participant doesn't actually have a qualifying birth or adoption, they are still liable for the 10% tax on their 1040, although how the IRS will know given the plan's good faith reporting on the 1099R is of course somewhat theoretical.

5 hours ago, Luke Bailey said:

don't look a gift horse in the mouth, and don't ask or tell

Don't ask Betty from accounting to bring her new baby into the office or ask her for pictures?  Not likely 🤣

Is it appropriate to put a limit on the number of requests from a participant that will be approved in a plan year?

44 minutes ago, FormsRstillmylife said:

Is it appropriate to put a limit on the number of requests from a participant that will be approved in a plan year?

Depends on whether it's birth or adoption, FormsRstillmylife.