What to Collect When Processing a Hardship Distribution

The following is a list of specific documents that the employer must collect based on each type of hardship. The employee must keep these documents available for the employer at all times.

To read a general overview of the employer’s responsibilities during a request for a hardship distribution, click here.

I. Notifications that the Employer/Administrator Must Provide to the Employee

• The hardship distribution is taxable and additional taxes could apply.
• The amount of the distribution cannot exceed the immediate and heavy financial need.
• Hardship distributions cannot be made from earnings on elective contributions or from QNEC or QMAC accounts, if applicable.
• The recipient agrees to preserve source documents and to make them available at anytime, upon request, to the employer or administrator.

II. General Information for All Hardship Requests

• Participant’s name
• Total cost of the event causing hardship (for example, total cost of medical care, total cost of funeral/burial expenses, payment needed to avoid foreclosure or eviction)
• Amount of distribution requested
• Certification by the participant that the information provided is true and accurate

III. Specific Information on Deemed Hardships

A. Medical Care

•  Who incurred the medical expenses (name)?
• What is the relationship to the participant (self, spouse, dependent, or primary beneficiary under the plan)?
• What was the purpose of the medical care (not the actual condition but the general category of expense, for example, diagnosis, treatment, prevention, associated transportation, long-term care)?
• Name and address of the service provider (hospital, doctor/dentist/chiropractor/other, pharmacy)
• Amount of medical expenses not covered by insurance

B. Purchase of Principal Residence

• Will this be the participant’s principal residence?
• Address of the residence
• Purchase price of the principal residence
• Types of costs and expenses covered (down-payment, closing costs and/or title fees)
• Name and address of the lender
• Date of the purchase/sale agreement
• Expected date of closing

C. Educational Payments 

• Who are the educational payments for (name)?
• What is the relationship to the participant (self, spouse, child, dependent, or primary beneficiary under the plan)?
• Name and address of the educational institution
• Categories of educational payments involved (post-high school tuition, related fees, room and board)
• Period covered by the educational payments (beginning/end dates of up to 12 months)

D. Foreclosure/Eviction from Your Principal Residence

• Is this the participant’s principal residence?
• Address of the residence
• Type of event (foreclosure or eviction)
• Name and address of the party that issued the foreclosure or eviction notice
• Date of the notice of foreclosure or eviction
• Due date of the payment to avoid foreclosure or eviction

E. Funeral and Burial Expenses

• Name of the deceased
• Relationship to the participant (parent, spouse, child, dependent, or primary beneficiary under the plan)
• Date of death
• Name and address of the service provider (cemetery, funeral home, etc.)

F. Repairs for Damage to Principal Residence 

• Is this the participant’s principal residence?
• Address of the residence that sustained damage
• Briefly describe the cause of the casualty loss (fire, flooding, type of weather-related damage, etc.), including the date of the casualty loss
• Briefly describe the repairs, including the date(s) of repair (in process or completed)