As Stone Cold Steve Austin said once: “Don’t trust anyone.” I’m not that severe in thought, but I do have a mistrust of people.

That’s perhaps why I take issue with allowing participants to self-certify that they are entitled to a hardship distribution.

Under the Code, plan sponsors can rely on the participant’s self-certification that they have experienced hardship and that the participant has no way to satisfy the hardship. Self-certification is only allowed for the first hardship request during a plan year. If the participant requests more than two hardship distributions in one year then the plan sponsor is required to have physical proof of the hardship.

For a plan sponsor to rely on a participant’s information, the participant needs to receive a notice that requires them to preserve the physical documentation of the hardship (and have them readily available at any time upon request. The problem is there is no guidance absolving a plan sponsor of any issues if the participant is less than honest about their hardship or lose the backup for their request. Until there is further guidance, I still recommend plan sponsors still approve of any hardship requests, rather than trusting a plan participant.