Carruth Compliance Consulting 403(b) Hardship Distribution Questionnaire

Transcription

1 Carruth Compliance Consulting 403(b) Hardship Distribution Questionnaire Please provide the following information: Participant s Name: Phone Number(s): Address: SSN: Employer: Date of Birth: Please answer the questions below. 1. Please list all of employer retirement plans vendors and plan types (403(b) or 457(b)) that you participate in, including the 403(b) account from which you wish to take a Hardship Distribution. (Please note: you must submit an account statement for each vendor below). a. Vendor Name Plan Type b. Vendor Name Plan Type c. Vendor Name Plan Type d. Vendor Name Plan Type e. Vendor Name Plan Type 2. Yes or No Are there distributions available* to you under the 403(b) plan and all other plans maintained by your employer (457(b), 401(k), and/or defined benefits plans) to address the Hardship? 3. Yes or No Has your EMPLOYER made contributions to your 403(b) account? (Note: EMPLOYER contributions are not eligible for Hardship Withdrawals, however, if you have an annuity contract issued prior to 2009 EMPLOYER contributions may be distributable.) 4. Yes or No Will suspending your current elective deferrals to your 403(b) or 457(b) account(s) alleviate your Hardship? If you answered, Yes to question 2, 3 or 4 above, STOP. You are required to explore and exhaust these resources to alleviate the financial need before requesting a Hardship Distribution. *Note: If you are eligible for any distribution for any reason (including attainment of Age 59.5 or Severance from Employment), you cannot take a Hardship Distribution. 5. Yes or No Do you have a loan available from any of your employer sponsored retirement plans (403(b), 457(b), 401(k), defined benefits plans)? 6. How much is available to you in loans from your employer sponsored retirement plan account(s)? a. Vendor Name $ b. Vendor Name $ c. Vendor Name $ d. Vendor Name $ e. Vendor Name $ 7. You must take a loan rather than a Hardship Distribution from your 403(b) account unless doing so is counterproductive. The IRS provides the following example of a loan being counterproductive: The need for funds to purchase a principal residence cannot reasonably be relieved by a plan loan if the loan would disqualify the employee from obtaining other necessary financing. (I.R.C. 401(k)1-(d)(3)(iv)) If a loan is counterproductive, you must provide a statement below explaining how taking out a loan will fail to satisfy your hardship. 1

2 8. Please read each of the following statements concerning loans from employer sponsored retirement plans. Place your initials next to each of the statements to indicate you understand these facts regarding loans from employer sponsored retirement plans. Statement I. I understand that an employer sponsored retirement plan loan is a loan from my own retirement account that I may repay over a number of years (terms vary by vendor and plan type, in 403(b) plans the term is generally 5 years). Participant Initials II. I understand that an employer sponsored retirement plan loan is not a considered a distribution from my account and is not a taxable event unless I default on the loan. A Hardship Distribution, however, is a taxable distribution subject to state tax, federal tax, and early withdrawal penalties (if applicable). III. I understand that an employer sponsored retirement plan loan does not require a commercial credit check, only the availability of a loan from my retirement account and due diligence to ensure I am eligible to take a loan at this time. 9. Hardship Distributions are available under very specific circumstances. Please check the reason(s) you are requesting a Hardship Distribution. (See the Hardship Distribution Information Supplement for detailed information on each of these circumstances and the acceptable documentation. Supporting documentation must be provided.) Certain medical expenses Costs relating to the purchase of a principal residence Tuition and related educational fees and expenses Payments necessary to prevent eviction from, or foreclosure on, your principal residence Burial or funeral expenses Expenses for certain damages to your principal residence resulting from a casualty If your reason for requesting a Hardship Distribution does not appear in the list above, STOP. You are not eligible to take a Hardship Distribution. 10. Please provide an itemized summary of all expenses and the total amount requested to alleviate the Hardship. (Please note: A Hardship Distribution may not exceed the amount of your specified and may only include documented expenses as described in the Hardship Distribution Information Supplement. Additional pages may be used to provide the summary.) Date Description of Hardship Expense Cost Total Hardship Request 2

3 Required Document Checklist In order to evaluate the appropriateness of your 403(b) Hardship Distribution request, CCC requires this form to be completed and submitted to CCC along the following list of required documents: The completed Salary Reduction Agreement (included in this packet) requesting the canceling my 403(b) elective deferrals and (if applicable) all 457(b) contributions. A completed Vendor Hardship Form Copies of all documented expenses relating to your Hardship Distribution. (Please see the attached Hardship Distribution Information Supplement for details concerning the acceptable documentation required for your hardship circumstance.) Copies of your most recent Account Statements from all vendors with which you have 403(b), 457(b), or any other type of retirement savings account sponsored by your employer. Participant certification I certify that the information I have provided above is true and accurate. I have read and understand the Hardship Distribution Information Supplement and the supporting documentation required. I understand that a Hardship Distribution may only be taken from the elective deferrals in my 403(b) account. I understand all information provided in this form and in the supporting documentation is subject to verification by CCC. I understand that a Hardship Distribution is taxable distribution and may be subject to early withdrawal penalties. I understand that it is my responsibility to preserve copies of all documentation related to this request for a Hardship Distribution and make them available upon request to my employer or the Plan Administrator. I have signed the Salary Reduction Agreement attached to this form requesting the cancellation of all 403(b) elective deferrals and (if applicable) any contributions to the 457(b) plan, as these contributions are restricted for a period of 6 months following a Hardship Distribution. X Participant Signature (Required) X Date Submit all required documentation to Carruth Compliance Consulting. You may fax this form and the required documents to CCC at or securely upload the documents to the following URL: If your vendor requires CCC / Employer approval with original (i.e., wet ) signatures, please mail documentation to: Carruth Compliance Consulting, Inc SW Durham Rd STE E-10 Tigard, OR If you have any questions or concerns, please call CCC at or toll free at

4 Salary Reduction Agreement Cancellation Request of all elective deferrals to the 403(b) and any contributions to (if applicable) the 457(b) Plan Employee Details Employer: Employee Name: Social Security Number: Employee Telephone: Employer, Please accept this notice as a request to cancel all elective deferrals to my 403(b) and all contributions (if applicable) to my 457(b) accounts effective immediately. I have requested a 403(b) Hardship Distribution and I understand that I am restricted from contributing to the plan(s) for a period of 6 months after a 403(b) Hardship Distribution is authorized. I understand that I will need to submit a new Salary Reduction Agreement should I wish to begin contributing once the 6 month timeframe has expired. Employee Certification and Signature I certify that I have read and understand the direction above. I direct the Employer to take the action stated above and the Employer accept my signature as evidence of my instruction. Employee Signature and Date 4

5 Carruth Compliance Consulting 403(b) Hardship Distribution Information Supplement General Information Regarding the Availability of Transactions Hardship Distribution transactions may be restricted by your vendor s investment agreement and the transaction processing requirements may vary from vendor to vendor. For example, Fidelity Investments requires wet signatures by the Participant and by CCC on all transaction processing forms. When available, CCC posts any available notes regarding transaction processing on CCC s General Information page for the vendor, which is accessible on the CCC website as follows: 1. Click on the large blue For Vendors button at the top of any page on the CCC website ( 2. Scroll down to the All Vendors Connected with CCC heading in the left-hand column; and 3. Click on the name of your vendor. For further information regarding the availability of hardship distributions and other vendor-specific information, please consult your investment provider (vendor), financial services professional, or the language contained in your annuity contract or custodial account agreement. Hardship Distributions are subject to their availability as an optional feature under the 403(b) Plan of the Employer associated with your account. CCC Client Plan Documents may be viewed by selecting the large blue Employee Entrance button at the top of the any page on the CCC website ( then selecting the appropriate Employer from the list of CCC clients, and then selecting the 403(b) Plan Document link in the light blue box on the page. Alternatively, you may select the 403(b) Information link and scroll down to the Which Optional Features Does the District Allow in its 403(b) Plan? heading in the left-hand column. General Guidelines for 403(b) Hardship Distributions By definition, a 403(b) Hardship Distribution is a distribution of funds requested to alleviate an immediate and heavy financial need. These distributions are subject to taxation and may be subject to early withdrawal penalties. Hardships may only be made under very specific circumstances as documented in this supplement and in each case supporting documentation is required. Hardship Distributions can only be made from employee contributions; Hardship Distributions are not available from employer-contributed amounts. In the event a Hardship Distribution is approved, the employer is required to suspend all elective deferrals to retirement plans of the employer for a period of 6 months following the distribution. Circumstances and for 403(b) Hardship Distributions Medical Expenses Medical expenses that are not covered by insurance for a participant, their spouse, their children, or their dependents may be a qualifying event for a hardship. Documentation Provided Must: o State the patient s name o State the amounts due or estimated that are not or will not be covered by insurance o State medical services, medications and/or devices provided o The documentation must be dated in the last six months prior to the submission of the hardship distribution request o Documentation for Medical Expenses must include expenses considered deductible per IRS Publication 502 o If the participant is not the recipient of the medical care, documentation of the patient s relationship with the participant must be provided. Depending on the relationship, the documentation may be provided via most recent tax return the participant filed, a marriage certificate or a birth certificate. o Medical bill(s) o Explanation of benefits from your insurance company o Collection agency notice o Pretreatment estimate from your doctor o Pretreatment explanation of benefits from the insurance company 5

6 Costs relating to the Purchase of a Principal Residence Hardship Distributions for costs related to the purchase of a primary residence may not include mortgage payment(s). Only amounts due from the buyer are eligible for inclusion in the Hardship Distribution, these amounts must be clearly stated in the documentation provided. Please note it may be necessary to provide a combination of the documents below to supply all the required information. A. Bill of Sale, Good Faith Estimate and/or Home Purchase Agreement for home purchase containing the following information: o Signed by the seller and the buyer o Lists the address of the property o Lists the selling price of the property o Lists a future closing dated (no more than 6 month from the hardship request date for existing construction and 1 year for new construction homes) B. Letter from mortgage lender stating amounts that must be paid for mortgage approval. Tuition and related Educational Fees and Expenses Hardship Distributions for the payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the employee, or the employee's spouse, children, or dependents and the start date of the first semester of planned attendance must begin no more the 90 days prior to the submission date of hardship request. Amounts requested for educational expenses must be documented and provided to CCC. Documentation should be provided in the form of an unpaid bill(s) or invoice(s). A. If the participant is not the student, documentation of the relationship (spouse, child or dependent) with the participant. This evidence may be provided via the most recent tax return the participant filed, a marriage certificate or a birth certificate. B. Evidence of the students acceptance to the education institution or evidence of continued enrollment must be provided, examples of this documentation include: o An acceptance letter from the education institution (for a new student) o A grade report or evidence of registration from a prior semester (for a continuing student) C. Documentation of the specific expenses for up to the next 12 months of post-secondary education: o Unpaid tuition bill(s) (must contain the name of the institution and the student) o Unpaid bill(s) for lab fees o Unpaid bill(s) for on campus housing o o Unpaid bill(s) meal plan bill For future semesters, evidence of tuition cost per credit from the institution of planned attendance and a statement from the participant concerning the estimated credit hours the student will taking in future terms Payments necessary to Prevent Eviction from, or Foreclosure on, a Principal Residence Amounts requested for a hardship of this nature must be documented in the form of a notice or letter from the participant s landlord or mortgage lender stating specifically that the failure to pay a specified amount will result in eviction or foreclose. Documentation of Eviction or Foreclosure Provided Must: o Clearly state that an eviction or foreclosure is to take place o Clearly state the future date amounts must paid by to prevent eviction or foreclosure (the eviction date or due date for payment cannot have already passed) o Notices of Eviction or Foreclosure must clearly state the name of landlord or lender and include contact information o Clearly state the address of the property where the eviction or foreclosure is to take place o Clearly state the financially responsible party for Eviction o Eviction notice from the landlord o If the Participant is not the renter appearing on the documentation of the eviction, evidence must be provided that the property is the primary residence of the Participant via a state issued ID containing the property address or a notarized letter stating the property is your primary residence. 6

7 for Foreclosure o Foreclosure notice from the mortgage lender o Court order concerning foreclosure o Letter from an attorney concerning foreclosure o If the Participant is not the mortgage holder appearing on the documentation of the foreclosure, evidence must be provided that the property is the primary residence of the Participant via a state issued ID containing the property address or a notarized letter stating the property is your primary residence. Please note: if you require acceptable documentation of Foreclosure from your lender, please see the Sample Letter to Request Documentation of Foreclosure at the end of this supplement. This sample letter is provided participants as an example of how to formally request the required documentation for evidencing your hardship. Please note that the documentation provided by the lender must still meet the requirements outline above. Burial or Funeral Expenses A Hardship Distribution may be approved for the payment of burial or funeral expenses for the employee's deceased parent, spouse, children, or other dependents. Participants are required to provide documentation of the amounts required via bills or estimates provided to CCC. o Itemized invoice/statement on the funeral home s letterhead dated within one year of the deceased s date of death, detailing the services provided and the cost AND o Official documentation that clearly shows your relationship to the deceased, such as a birth certificate, marriage license, or obituary Certain Expenses for the Repair of Damage to the Employee's Principal Residence Repairs to a principal residence must fall under the IRS s description of a casualty in order to be a qualifying event for a Hardship Distribution. The damage must be from an event that is sudden, unexpected, or unusual. Damages resulting from progressive deterioration of one s residence due to normal wear and tear, normal weather conditions, or termite and moth damage are not considered casualty losses. Casualty losses can result from a number of causes, including the following examples: car accidents, earthquakes, fires, floods, vandalism, and volcanic eruptions. Some examples paraphrased from IRS Publication 547 (2008) that illustrate what would be considered a casualty loss and what would not: Example 1: The deterioration of a water heater that burst is not considered a casualty loss, however the resulting damage to the home due to the water and rust would be considered a casualty loss. Example 2: Gradual damage incurred due to fungus, disease or pests are not considered a causality loss, however damage due to the sudden infestation of a pest that is unusual and unexpected may be considered a casualty loss. Please note that if you receive insurance or other type of reimbursement, you must subtract the reimbursement amount from the Hardship Distribution request. CCC will consider the following factors when evaluating the appropriateness of a Hardship Distribution for home repair. 1. Do the repairs and events leading to the repair needs meet the IRS definition of a casualty loss? 2. Are the documented repair costs provided to CCC consistent with the event described and the amount requested? o Explanation of insurance benefits or other insurance policy documentation indicating amounts of repairs not covered by reimbursement under the insurance claim for the casualty loss (including the deductible). Note: If the property is covered by insurance, a timely insurance claim must have made for the loss to be considered as a casualty for purposes of a Hardship Distribution. o Official report of the loss explaining the nature of the damage and events leading to the damage (such as the report or claim from the insurance company) o Bill(s) or estimate(s) for repairs of damage to the principal residence 7

8 Sample Letter to Request Documentation of Foreclosure (Address this letter to your mortgage lender) Re: (please insert the account number associated with the home loan and address under threat of foreclosure) To Whom It May Concern: I am seeking a Hardship Distribution from my employer sponsored 403(b) retirement plan to obtain the funds necessary to prevent foreclosure. I am writing to request documentation required by the 403(b) plan administrator to evidence the foreclosure. Please provide a letter containing the following information: The lender s name and contact information (preferably in the document letterhead) The property address that is under threat of foreclosure A statement explaining how much is due by what date to prevent foreclosure Please provide the above-described letter to my attention at (insert contact information such as , address, or fax). Thank you for your assistance, Best regards, (Insert name and sign) 8