Documentation Retention for Hardships and Loans

by Jennifer Marecek
May 11, 2015

As today’s electronic record keeping and processing environment continues to evolve, the evidence to support certain employee benefit plan transactions is often falling by the wayside.In fact, many Plan Sponsors rely on their third-party administrator (“TPA”) for maintaining documentation through the TPA’s website (i.e. enrollment forms, loan requests, distributions requests, etc). However, recent guidance issued by the IRS cautions that it is the plan sponsor and not the TPA or participant who is responsible for maintaining documentation sufficient to prove that such transactions comply with the law particularly with respect to loans and hardship withdrawals.

This evidence may include but is not limited to loan applications, executed promissory notes, proof of utilization for primary residence if applicable, collection efforts in the event of a default and others.

These types of transactions result in additional supporting documentation which should be maintained in employee files once approved by the Plan Administrator. A failure to maintain this information may be considered a qualification failure under the EPCRS and should be corrected.

If you are a Plan Sponsor that would like schedule a review of your current files for compliance or if you have any other employee benefit plan related matters that you would like to discuss, please contact Quinn R. Martin or MaryPat Davitz.


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