The Internal Revenue Service (IRS) recently issued updated audit guidelines for its agents regarding the substantiation requirements for hardship withdrawals from 401(k) and 403(b) plans. This guidance is welcome news for plan sponsors who rely on third party administrators to process participants' requests for hardship withdrawals, as it relaxes previous IRS guidance which (1) required plan sponsors to obtain and store copies of the actual source documents (e.g., medical bills, cancelled checks, etc.) that established a participant's request for a hardship withdrawal and (2) did not permit participant self-certification of hardship withdrawal requests.
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