NAPA Net - Polling Places 100419

Has There Been a Shift in Hardships?

The Treasury Department and IRS have just published final regulations on hardship distribution options – along with some changes, and clarifications, from the proposed version. This week, we’d like to know what the response has been, if any, among your plan sponsor clients.

You’ll recall (certainly now) that the Bipartisan Budget Act of 2018 (“BBA 2018”) directed the Secretary of the Treasury to “modify §1.401(k)-1(d)(3)(iv)(E) to (1) delete the 6-month prohibition on contributions following a hardship distribution and (2) make any other modifications necessary to carry out the purposes of section 401(k)(2)(B)(i)(IV).” You may also recall that on Nov. 14, 2018, the Treasury Department and the IRS published proposed regulations regarding hardship distributions. And, of course, late last week, the final regulations were published.

For the most part, the final regulations followed the path blazed by the proposed version (the IRS/Treasury characterized them as “substantially similar to the proposed regulations”).

That said, the reality that the regulations are now – a reality - and the inevitable press coverage around the new, more liberal hardship restrictions suggests that plan participants, if not your plan sponsor clients, will soon be either making changes, or asking questions about making changes, or perhaps both. Now we'd like to know what you're hearing - and saying - and doing...

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* 1. Have you communicated with your plan sponsor clients about the changes in hardship withdrawal rules?

No.

Some, not all.

Most yes, not all.

Yes.

Yes, but not since the proposed rules were released.

Are you kidding? It's only been a week.

What changes in hardship withdrawal rules?

Any comments?

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* 2. Generally speaking, how have your plan sponsors responded to the news of those changes?

They've been nervous about the implications.

They've been pleased.

They're letting their recordkeeper/TPA worry about it.

They don't seem to care.

What changes in the hardship withdrawal rules?

Any comments?

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* 3. Generally speaking, are those new hardship rule changes in place with the plans you work with?

Yes, all.

Yes, most.

Yes, but only some.

Not yet.

No.

I've no idea.

What changes in the hardship withdrawal rules?

Something else (please specify).

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* 4. Generally speaking, do you think the changes in hardship withdrawal rules are:

Positive.

Negative.

Good in the short-term, not as sure about the long-term.

Both positive and negative.

Bad in the short-term, but ok in the final analysis.

Something else (please specify)?

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* 5. How would you rank the various provisions (5 being a great idea, 1 being something not-so-hot).

	This is going to be a problem	The bad seems to outweigh the good	I'm OK with it.	Mostly fine, just a bit worried about possible implications.	Wonderful idea.
The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions	The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions This is going to be a problem	The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions The bad seems to outweigh the good	The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions I'm OK with it.	The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions Mostly fine, just a bit worried about possible implications.	The ability to include additional plan account sources (beyond 401(k) pre-tax) in hardship distributions Wonderful idea.
The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas	The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas This is going to be a problem	The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas The bad seems to outweigh the good	The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas I'm OK with it.	The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas Mostly fine, just a bit worried about possible implications.	The ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas Wonderful idea.
Eliminating the post-withdrawal 6-month suspension of elective deferrals	Eliminating the post-withdrawal 6-month suspension of elective deferrals This is going to be a problem	Eliminating the post-withdrawal 6-month suspension of elective deferrals The bad seems to outweigh the good	Eliminating the post-withdrawal 6-month suspension of elective deferrals I'm OK with it.	Eliminating the post-withdrawal 6-month suspension of elective deferrals Mostly fine, just a bit worried about possible implications.	Eliminating the post-withdrawal 6-month suspension of elective deferrals Wonderful idea.
Eliminating the requirement for participants to take plan loans first	Eliminating the requirement for participants to take plan loans first This is going to be a problem	Eliminating the requirement for participants to take plan loans first The bad seems to outweigh the good	Eliminating the requirement for participants to take plan loans first I'm OK with it.	Eliminating the requirement for participants to take plan loans first Mostly fine, just a bit worried about possible implications.	Eliminating the requirement for participants to take plan loans first Wonderful idea.
Changes in the administrative process required to document that a participant has demonstrated the requisite financial need	Changes in the administrative process required to document that a participant has demonstrated the requisite financial need This is going to be a problem	Changes in the administrative process required to document that a participant has demonstrated the requisite financial need The bad seems to outweigh the good	Changes in the administrative process required to document that a participant has demonstrated the requisite financial need I'm OK with it.	Changes in the administrative process required to document that a participant has demonstrated the requisite financial need Mostly fine, just a bit worried about possible implications.	Changes in the administrative process required to document that a participant has demonstrated the requisite financial need Wonderful idea.

Any comments?

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* 6. Other comments about hardship withdrawals, the restrictions around hardship withdrawals, the implications of change in the restrictions around hardship withdrawals, the mechanics of change in the restrictions around hardship withdrawals, the need for change in the restrictions around hardship withdrawals, or life in general?

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* 7. What is your role working with retirement plans?

Advisor

Provider

TPA

Plan sponsor

Recordkeeper

Other (please specify)

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* 8. What size plans do you PRIMARILY work with?

Under $10 million in assets

$10-$20 million

$20-$50 million

$50-100 million

$100 million - $250 million

$250 million - $500 million

Above $500 million

Other (please specify)

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* 9. Suggestions for future survey questions? What would YOU like to ask other NAPA-Net readers?

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* 10. All responses are anonymous and confidential, of course - but if you'd like me to know who you are, or allow for a response, you can leave your email below...