Documentation Relief For Hardship Distributions

Retirement plans are permitted, but not required, to provide in-service distributions of elective deferrals to participants if they can show financial hardship, which is defined as a hardship that is "deemed to be on account of an immediate and heavy financial need." The IRS delivered good news earlier this year for those needing to demonstrate such a hardship, when it issued its Memorandum for Employee Plans Examination Employees (EP Memorandum). The memo indicates that participants no longer need to provide source documents to show their financial hardship, and that plan sponsors may instead rely on participant-provided summaries as long as the participants agree to retain any source documents.