IRS Provides 401(k) Fix-It-Guides for Hardship Distribution and Participant Loan Failures
The IRS recently released 401(k) Plan Fix-It-Guides for situations where hardship distributions weren’t made properly or where plan loans didn’t conform to the IRC’s requirements. As background, IRS Fix-It-Guides provide information on how to identify, fix and avoid common 401(k) plan compliance failures.
Specifically, the guide on hardship distribution failures identifies the circumstances that will allow for a hardship distribution and identifies the steps to take if a hardship distribution was provided that did not comply with the plan document terms. Likewise, the guide on participant loan failures identifies the IRC requirements for plan loans and how to fix a failure.
Although this guide does not impose any specific employer requirements, it does provide valuable information to plan sponsors who are looking to keep their 401(k) plan compliant. Employers should consult with their adviser if they have committed any of these operational failures.