For a governmental 457 plan, is the employer likely to find a plan administrator willing to do the hardship/unforseeable emergency determination?
This employer a) doesn't like privacy issues which often turn up due to information contained in the requests for hardship distributions, and b) would prefer to have a third party making decisions to avoid any perceived favoritism or differences in treatment.
Full Version: Delegate hardship/unforseeable determination?
It should not be too difficult to find a TPA who would take on the role of determining hardships under the 457(b) regs.
If you were wondering why a recordkeeper is willing to accept responsibility for discretionary decisions on unforeseeable-emergency claims under a governmental plan when the same recordkeeper usually is unwilling to make similar discretionary decisions under an ERISA-governed plan, here's why.
Although ERISA allows fiduciaries to allocate responsibilities, a fiduciary can't get rid of the ERISA 405(a)(3) co-fiduciary duties that result from having knowledge of another fiduciary's breach. Because a typical plan's named fiduciary is the employer and the recordkeeper's customer, it can be unpleasant to have duties to take steps to remedy one's customer's wrong decision. By contrast, a State's law of trusts and fiduciary relationships often allows more flexible opportunities to negotiate or manage co-fiduciary duties.
Although ERISA allows fiduciaries to allocate responsibilities, a fiduciary can't get rid of the ERISA 405(a)(3) co-fiduciary duties that result from having knowledge of another fiduciary's breach. Because a typical plan's named fiduciary is the employer and the recordkeeper's customer, it can be unpleasant to have duties to take steps to remedy one's customer's wrong decision. By contrast, a State's law of trusts and fiduciary relationships often allows more flexible opportunities to negotiate or manage co-fiduciary duties.
QUOTE (Fiduciary Guidance Counsel @ Sep 22 2009, 08:01 AM) 
If you were wondering why a recordkeeper is willing to accept responsibility for discretionary decisions on unforeseeable-emergency claims under a governmental plan when the same recordkeeper usually is unwilling to make similar discretionary decisions under an ERISA-governed plan, here's why.
Although ERISA allows fiduciaries to allocate responsibilities, a fiduciary can't get rid of the ERISA 405(a)(3) co-fiduciary duties that result from having knowledge of another fiduciary's breach. Because a typical plan's named fiduciary is the employer and the recordkeeper's customer, it can be unpleasant to have duties to take steps to remedy one's customer's wrong decision. By contrast, a State's law of trusts and fiduciary relationships often allows more flexible opportunities to negotiate or manage co-fiduciary duties.
Although ERISA allows fiduciaries to allocate responsibilities, a fiduciary can't get rid of the ERISA 405(a)(3) co-fiduciary duties that result from having knowledge of another fiduciary's breach. Because a typical plan's named fiduciary is the employer and the recordkeeper's customer, it can be unpleasant to have duties to take steps to remedy one's customer's wrong decision. By contrast, a State's law of trusts and fiduciary relationships often allows more flexible opportunities to negotiate or manage co-fiduciary duties.
Thanks. This confirms my guess that ERISA issues were involved. I am guessing that providers who do a large amount of 457 plans are more likely to do such determinations than firms who do mostly 401(k) plans and only a few 457s. I've noticed that among providers of 457s, some of their contracts have extensive references it ERISA, implying that they borrowed contract language from their 401(k) plans.
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