Now that hardship rules are changing in 2019 with the elimination of the six-month deferral suspension and the need to exhaust loans first, expect more hardship distributions in the near future. Once these barriers for hardship distributions are eliminated, it would be no shock to me that the number of distribution requests is increased.

The problem with hardships, other than the fact that there are assets leakage is that I don’t believe that many plan sponsors do a great job in vetting hardship distribution requests. Plan sponsors have a fiduciary duty to review any hardship requests and make sure the hardships are documented by the plan participant. The Internal revenue Service in the not too distant past has increased review of hardship requests during plan audits especially for those participants with multiple hardship requests.

So as more and more requests may be headed, plan sponsor needs to implement a process where hardship requests are actually reviewed and vetted.