FAQs | Employers & Plan Sponsors | Randall & Hurley

Employer FAQs

Operating a retirement plan can be complicated at times. Randall & Hurley is here when you need us, and you can contact your plan consultant whenever you have a question. To save you time, we've included some of the most commonly asked questions--and the corresponding answers--here for your use.

Basic Plan Design

Plan Documents

Plan Operations & Reporting

Using the Web

Managing Employee Issues

Basic Plan Design & Plan Documents

What is a 401(k) plan?

A 401(k) Plan provides significant advantages to both employers and employees. Not only does a 401(k) plan attract and retain qualified employees, but it also provides a low-cost means of providing visible and appreciated retirement benefits to employees. Employees have a real opportunity to participate actively in saving for retirement on a tax-deductible basis. When employer contributions are made, funds are allocated to participants before federal and state income taxes are imposed on such funds.

Employees choose to contribute a certain dollar amount (or percentage) to their retirement account. These contributions are made directly from pay before federal and state income taxes are imposed. These contributions earn a pre-tax investment income, and a discretionary matching or profit sharing employer contributions may be made. Forfeitures from terminated employees can be added to the employee accounts or can be used by the employer to help defray the administration costs. A 401(k) plan has a high degree of flexibility in its design and can also include hardship withdrawals and participant loans, among other options.

What is a 403(b) plan?

A 403(b) plan, also called a tax-sheltered annuity (TSA) plan, is available to certain employees of public schools, tax-exempt organizations and ministers. The features of a 403(b) plan are similar to a 401(k) plan. Plan investments can include annuities, mutual funds or a retirement income account for church employees.

What is a 457 plan?

A 457(b) plan is nonqualified retirement program available only to government employees or highly compensated employees of non-profit corporations, depending on the type of 457 plan. In some ways, the plan operates like a 401(k) plan. Plan assets are held in a trust or custodial account for the exclusive benefit of plan participants, and contributions and earnings are tax-deferred. However, major differences still exist:

The plan is nonqualified and not subject to the same federal legislation as qualified plans
Not all employees need to be included in the plan, and independent contractors may be included.
Employee contribution limits are not combined with other plan contributions, allowing employees to contribute the maximum amount per year to BOTH a qualified plan and a 457 plan, doubling traditional contribution limits.
There is no 10% early withdrawal penalty for employees who retire from service before reaching age 59 1/2.

What is a profit sharing plan?

A Profit Sharing Plan is a retirement arrangement in which the company may make a discretionary contribution each year. These contributions are invested in a tax-deferred, creditor-proof trust. Tax-free earnings accumulate until the eventual distribution to participants or their beneficiaries. This payout usually occurs at retirement or some other specialized event (disability, death or termination of employment). Contributions are normally keyed to yearly profits, although profits are not required for a contribution to be made. Retirement benefits paid to employees are based on the amount in the participant's account at retirement. Note that a profit sharing plan can include 401(k) features.

Profit sharing contributions may be allocated to each participant in proportion to pay, integrated with the Social Security Wage Base, or weighted on age and/or service with the employer.

What is a new comparability plan?

A new comparability plan or "age-weighted" plan is a type of profit sharing plan where employers have the ability to weight contributions in favor of key employees who are older than the remainder of the employees. Employees are divided into groups, and each group receives a different employer contribution amount. This feature can be included in a 401(k) plan and is helpful when employees are not deferring at high enough levels to allow highly compensated employees to contribute as much as they would like. Compliance testing is much more complex and performed on a cross-tested basis. Please contact us to see if this plan type is right for you.

What is a money purchase plan?

A money purchase pension plan is a retirement arrangement in which employer contributions are mandatory and usually based on a percentage of each eligible employee's compensation. A contribution formula is determined by the employer at the inception of the plan. These employer contributions are tax-deductible and are contributed on each employee's behalf to be distributed at retirement, disability, death, or termination of employment. As with profit sharing plans, the employer contributions may be made subject to a vesting schedule.

What is an employee stock ownership plan (ESOP)?

An employee stock ownership plan is a special type of plan whose funds must be invested primarily in employer securities (stock). This type of arrangement benefits the employer in three ways: (a) providing a market for the company's stock, (b) giving the employer tax deductions without affecting cash flow and (c) keeping company stock in friendly hands in the event of a hostile takeover of the company.

What is a defined benefit plan?

A defined benefit plan essentially offers employees a guaranteed paycheck for the remainder of their lifetime. Retirement benefits earned under this type of plan must be definitely determinable. For example, a plan that entitles a participant to a monthly pension for his or her post-retirement lifetime equal to 30% of monthly compensation is a defined benefit plan. Employer contributions are actuarially determined, certain benefits may be insured by the Federal Pension Benefit Guaranty Corporation (PBGC) and special rules apply upon termination of this plan.

What is a DB(k) plan?

A DB(k) plan or "eligible combined plan" incorporates aspects of both a defined benefit plan and a defined contribution plan.

Plan administration is simplified: all plan assets are held in one trust; there is one plan document, one Summary Plan Description, one Form 5500 and one audit (if required at all); the plan is also not subject to nondiscrimination testing.

Key elements of this plan include:

A 1% of final average pay for each year of service, up to 20 years
An automatic enrollment feature with a 4% of pay employee contribution (unless the employee opts out)
An employer match of at least 50% of employee deferrals, up to a maximum of 2% of pay

This plan type is only available for employers with no more than 500 employees.

What is a cash balance plan?

A cash balance plan is a type of defined benefit plan that defines the retirement benefit in terms of a stated account balance. Each year, an employee may accrue a pay credit (equal to a percentage of pay or a flat-dollar amount) and an interest credit (usually linked to an index). The investment risk and return is borne solely by the employer, and the plan accounts are maintained by an actuary.

In return, cash balance plans offer owners and partners significant tax reductions. Contributions to a cash balance plan can have the same financial impact as a deduction that reduces ordinary income dollar for dollar. Many businesses can benefit from a cash balance plan, and we recommend you speak with one of our plan design specialists to see if this plan type is right for you, especially if you:

Are a partner or owner who wishes to contribute more than $45,000/year to retirement
Are a partner or owner wanting to "catch up" or accelerate your retirement savings
You already make 3% employee contributions

What is a section 125 cafeteria plan?

Increases in the cost of individual medical expenses, group health and dental insurance premiums, and dependent care expenses have encouraged a number of employers to adopt a Cafeteria Plan. This benefit allows employees to use pre-tax dollars to pay health insurance premiums, medical expenses (even those not covered by insurance), and dependent care costs for themselves and their families. Since contributions are taken from pay before federal and state income taxes and before payroll and unemployment taxes, the employee can truly avoid (not simply defer) all taxes on these contributions. Tax advantages may vary from state to state. The reduction in employer and employee payroll taxes will often more than offset the administrative costs of maintaining a Cafeteria Plan.

What is a vesting schedule?

A vesting schedule helps rewards long-term employees by requiring employees meet certain requirements before they are entitled to employer contributions (even though they have already been deposited into the participant's account), such as working a certain number of hours each year. Employees who terminate employment before they are fully vested are only entitled to a percentage of the value of their employer contributions.

A vesting schedule can only apply to employer contributions and will never apply to safe harbor contributions.

What is a "qualified" plan?

A qualified plan offers benefits to all eligible employees on a non-discriminatory basis, whereas a nonqualified plan is offered only to executive employees. The retirement funds in a qualified plan are not subject to the company's liabilities, which means that even under a dramatic circumstance such as bankruptcy, these funds are wholly protected from creditors. They are "guaranteed," so to speak. If a plan is determined qualified by the IRS, many specific tax advantages are also given to the company. One tax advantage is an income tax deduction for contributions.

What is an "unbundled" plan?

An "unbundled" plan uses multiple entities to provide plan services, thus ensuring the best fit in each area of expertise. Essentially, plan services are provided by those who are able to do so at the lowest cost and with the greatest level of efficiency and expertise. A third party administrator, like Randall & Hurley, provides the consulting, recordkeeping and compliance services needed to properly account for participant plan balances and to insure that the federal pension rules are properly applied to the retirement plan. An investment custodian independent of the administrator provides the critical facet of plan maintenance, making prudent investments available to the employees.

There are several key advantages in utilizing an unbundled administrator, including:

More flexibility. The sponsoring employer and participating employees may choose among any and all prudent investments when an unbundled approach is selected. Plan provisions may be individually designed to meet specific client objectives.
Greater expertise and familiarity with IRS and DOL rules. Randall & Hurley is the only firm in the Inland Northwest to employ an ERISA attorney and several actuaries in-house.
Lower, ascertainable costs. Unbundled third party administrative fees are determined separately from asset-based charges. Our fees are easy to understand and future charges may be projected with a high degree of certainty. This is different from "bundled" charges, where as plan assets grow, plan charges similarly increase and materially lower participant investment returns and fund accumulations over time.
No conflicts of interest. Unbundled third party administrators remain independent of products and services (e.g., investments, insurance, internal audits) that may not be in the best interest to the client.

Can our 401(k) Plan be designed so that the owners who are covered by the plan receive large tax deductible plan allocations, while keeping staff funding costs at relatively low levels?

Yes, depending on the demographics of your business. Randall & Hurley can provide you with a free plan analysis to see if a cross-tested or new comparability allocation formula should be included in your plan documents. This process will analyze and compare the ages and compensation of your owners and other staff to determine the best plan design options for your company.

Plan Documents

What is the difference between a plan document and a Summary Plan Description (SPD)?

Qualified plans are governed by the Employee Retirement Income Security Act (ERISA) and are required to have a written plan document, which the IRS may review. This document is complicated, lengthy and written in legalese.

A summary plan description is distributed to potential plan participants, written in plain language, and summarizes the key components of the plan document, including advantages and disadvantages of the plan's specific provisions.

You may also want to review what happens when plan documents differ from the SPD.

Why do I have both a plan document and then separate model amendments? What's the difference?

Your plan document is updated every six years per an IRS schedule. This is called a restatement. Any legislative changes that occur between the six year restatement points are handled through “model” amendments. The model amendments incorporate new language from the legislative changes. The model amendments accumulate until you reach another restatement point, at which time the document is updated to include the changes.

How often will my plan document need to be restated?

The IRS requires that plan documents are restated every six years in order to include all legislative changes that have occurred during that time period. You may also need to restate your plan document if you make substantial changes to your plan design. Many changes can be done using a plan amendment, instead of a total plan restatement, which reduces costs significantly. Please contact our legal department for more information about this topic.

How do I know if I have an investment policy statement? Who prepares this?

We recommend that you keep a copy of your plan's investment policy with your other plan documents. If you are not sure if you have an investment policy, you may wish to check with your financial advisor. Investment policies can be written by your organization or by your financial advisor, or as a joint project. If your organization has written the investment policy or has recently switched financial professionals, you should provide a copy of your policy to your financial advisor or broker.

As a guiding principle, Randall & Hurley remains free from providing investment advice or preparing investment policies. We encourage you to speak with your financial professional.

The SPD is different than the plan document. Which one should I use?

The provisions in the Summary Plan Description (SPD) should always match those found in the plan document. Each time a plan is restated or otherwise modified, updated Summary Plan Descriptions should be distributed to employees.

However, if you find that the two documents differ, you should immediately contact us to obtain an updated SPD. In the meantime, if you find that your SPD does differ, courts have consistently ruled that since the SPD is "the statutorily established means of informing participants of the terms of the plan and its benefits," and the "employee's primary source of information regarding employment benefits," the SPD would take precedence over the plan document (Pierce v. Security Trust Life Insurance Co., 979 F2d 23 (4th Cir. 1992)).

PLAN OPERATIONS & REPORTING

Our ownership/ business structure is changing, do I need to notify you of the changes?

It is especially important to involve us when there is a merger or acquisition involving your business. We will need to work with you and your counsel to discuss options for your existing retirement plan. You may notify us of these changes by contacting your plan consultant or by using the Business Change Form available in the Forms section of your account (after login).

Who is the Plan Administrator?

The person (or organization) that is identified in the plan document as having responsibility for running the plan. It could be the employer, a committee of employees, a company executive, or someone hired for that purpose. Although Randall & Hurley provides plan administration, we are not the Plan Administrator and do not sign the Form 5500 as such.

What are the plan limits for the year?

Plan limits change each year and are determined by the IRS. Changes are based on the cost of living increase during the prior year, and are announced in mid-October for the upcoming year. Find the most current plan limits in our What's New section.

How long do I have to deposit the employee and employer contributions?

The Department of Labor recently finalized regulations, applicable primarily to defined contribution plans with fewer than 100 participants, that provide a seven-business-day safe harbor period for employers to deposit participant contributions and loan payments. The DOL did not expand the rule to include plans with over 100 participants, due to a lack of information and data sufficient to properly evaluate employer practices. Employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer.

How do I know which employees are "participants" in the plan?

The IRS defines a "participant" as an employee who has satisfied the eligibility requirements to enter the plan. If you have a 401(k) plan, you may have both contributing and non-contributing participants. Even if an eligible employee doesn't sign up to make contributions, he/she is still counted as participating in the plan and is designated as a "participant." We must use the IRS definition when counting participants to report on Form 5500, and we use this same method when preparing our invoices for plan administration.

Can I deliver my required notices electronically?

ERISA disclosures may be delivered electronically to employees that:

have the ability to access documents furnished in electronic format at any location where the employee is reasonably expected to perform his/her duties, and
are expected to have access to the employer’s electronic information system as an integral part of those duties.

Beneficiaries and other plan participants can consent to receive disclosures electronically, but the plan administrator must obtain written consent prior to electronically delivering ERISA disclosures to beneficiaries and other plan participants who do not have work-related access to a computer. The consent may be received in either electronic or paper form.

How do I order new enrollment materials?

Your enrollment materials are customized for your plan. Please contact your plan consultant for new enrollment materials.

Do I need to report sick/vacation hours and compensation?

When reporting payroll and census data, an “Hour of Service” is defined as:

each hour an employee is compensated or entitled to compensation by the employer for the performance of duties during the plan year
each hour for which an employee is compensated for reasons other than performance of duties (called non-performance hours), such as vacation, holidays, sickness, incapacity (including disability), jury duty, lay-off, military duty or leave of absence

When reporting compensation you should review your plan document. Most plan documents, but not all, define compensation as W-2 compensation with the following adjustments: (1) add back in any salary deferrals (401(k), 125, 132(f), 403(b), SEP, 414(h) pickup and 457); and (2) exclude reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation and welfare benefits. If you have employees who became eligible in the current plan year and your plan document excludes compensation prior to becoming eligible to participate in the plan, your plan consultant may ask you for partial year compensation for these participants.

What are the responsibilities of a plan fiduciary?

The DOL has prepared a brochure entitled "Meeting Your Fiduciary Responsibilities." A copy can be obtained from the Employee Benefits Security Administration's (EBSA) website at www.dol.gov/ebsa/publications/fiduciaryresponsibility.html.

The brochure is a good overview of the responsibilities of plan fiduciaries, including their duties to:

Prudently select and monitor service providers
Carefully evaluate the fees being charged to ensure that they are reasonable relative to the particular services and investments
Inform participants of various aspects of the plan; for example, via the Summary Plan Description (SPD)

While the brochure is too basic for an experienced fiduciary, it provides a good starting point for new plan sponsors or retirement committee members to learn about the responsibilities of their job. In fact, in the brochure the Department of Labor notes that, "An employer... when using [a] committee, should educate committee members on their roles and responsibilities." If your company does not have such a program in place, it should develop a fiduciary education program for its committee.

If you would like additional assistance or clarification regarding your role as a fiduciary, ask your plan consultant for assistance or contact a member of our Legal Department.

We rehired an employee, is he eligible?

Yes. Once an employee has met the eligibility requirements for the plan, he or she is eligible to participate. Even if the eligibility requirements have changed since the last employment period, the employee will remain eligible to participate in the plan. However, the employee may or may not receive an employer contribution, depending on the allocation requirements stated in the plan document.

When is my census information due to my plan consultant?

Generally, we prefer to have your plan's year end census information sometime during the first quarter of the following year. This allows us plenty of time to provide you with the high quality service you deserve and time for you to properly address or correct any problems that occurred during the year.

That being said, your retirement plan's IRS Form 5500 is due on the last day of the seventh month following the end of the plan year, and that deadline can be extended for an additional two and one-half months. For plans ending on 12/31, this means your signed forms are due to the IRS no later than October 15th. In order for us to accurately complete your plan administration and prepare your return in a timely manner, your completed census information must be returned to your plan consultant no later than 9 months following the plan's year end. For plan years ending on 12/31, your deadline is September 30th.

What information did we give you last year?

Each year, we need a complete census, including pertinent dates, hours, compensation and plan contributions. Nearly all bookkeeping software can export this information into an electronic file. We encourage you to keep a copy of the files you send to us for your records. You may also consult your annual report from the prior year. We have provided a blank census template in our Forms section. You can also find a copy of our census instructions. If you have questions, please feel free to contact your plan consultant.

What should I do with the beneficiary forms?

Beneficiary forms for retirement plan participants should be completed once the employee is eligible to participate in the plan. We recommend that these forms become part of the employee’s permanent personnel file. We do not need a copy of these forms; however, many of our clients make copies of these forms and send a copy to our offices for safety. The original completed beneficiary form should remain under your care.

What is revenue sharing? What are sub-transfer agency fees?

A mutual fund typically builds into its fees charges for services that sometimes are performed by a TPA firm (like Randall & Hurley). When this happens, the mutual fund may pay the TPA for those services. This is called revenue sharing.

Investment platforms also structure their fees based on the services they may need to provide. When a TPA firm (like Randall & Hurley) performs those recordkeeping functions, they are reimbursed for those services. This is called sub-transfer agency fees (sub-TA fees).

If Randall & Hurley receives revenue sharing or sub-transfer agency fees on behalf of your plan, we credit your account dollar-for-dollar (after an annual monitoring fee). These amounts are applied to your account as credits and offset our fees. In some cases, this can account to significant fee reductions for our services.

The understanding and disclosure of fees is an important topic for plan fiduciaries. Please contact us for more information.

How do I file my Form 5500 electronically?

The Department of Labor now requires that all Form 5500s be filed electronically. You have two options available:

File the Form Electronically. You will need to obtain signing credentials in order to electronically sign the Form 5500 or Form 5500-SF by registering on the EFAST2 website. Once your Form 5500 has been prepared, you will receive an electronic notification from our system. Then, you will login to your plan account, electronically sign the form with your credentials and electronically submit the Form 5500 to the IRS.

Authorize Randall & Hurley to Submit the Form. In order to use this option, we must have specific, written authorization from the plan sponsor that authorizes us to submit the Form 5500. (Login to your account to access the Form 5500 Authorization.) You must also manually sign a paper copy of the completed Form 5500 or 5500-SF and return those pages to our offices, as we must include a PDF of those pages with the submission. (If you choose this option, be aware that your signatures will be available to view on the DOL website.)

All Form 5500 filings will be posted on the Department of Labor's website within 90 days of receipt in order to satisfy the Pension Protection Act requirements.

USING THE WEB

I can't remember my User ID or password. How do I retrieve it?

For your plan’s security, we do not allow you to retrieve your User ID or password via the Internet. Please call our customer service representatives or your plan consultant to restore or change your User ID or password. (Plan participants, however, are able to retrieve their User IDs and/or passwords online.)

When I submit my file online, how do I know it has been uploaded correctly?

When submitting a file using our Submit Data link, you must be sure to continue moving through the steps until you select the option “Submit for final processing” and click the “Complete Payroll” button. After this step, you will receive a confirmation number. If you have not received a confirmation number, you have not completely submitted your payroll file. Since our system checks your file for format and data errors, if you have received a confirmation number, your file has uploaded correctly.

When submitting a file using the File Upload link, a new window will appear with the name of the file and the confirmation, “File uploaded to server.” Your submitted file will be reviewed by our offices as soon as possible.

Both of these features are available after you login to your account.

Can't I just send my information via email? Why do I need to login to my account?

We ask that you do not send us confidential information (like payroll and census reports) via email. Email is not secure, even when you password-protect the actual file. The routing process of each email you send hops across many servers where any number of people may intercept your mail.

In addition, by uploading your file to our website, you ensure that your file is formatted properly and correctly corresponds to your plan’s existing data. This will help us administer your plan in a timely manner and prevents delays in processing.

How do I review the file that I have uploaded?

Once your file has been uploaded, you may not review it or make changes to it. You can view the totals and the number of rows submitted from the Submit Data starting page by selecting the payroll period and clicking the “View Totals” button. You should be able to review the complete file by accessing the stored file on your computer, however.

Where do I find blank forms for our plan?

Once you login to your plan's account, you will find links to your plan-related forms. Participants in the plan will also find forms they may need if they login to their account. By using the web, we can be sure that the forms available to you are appropriate for your plan's provisions and policies. In many cases, these plans are partially completed, saving you time as well.

MANAGING EMPLOYEE ISSUES

If my employees need help selecting their investments, who should they contact?

Participants seeking investment advice should be referred to the plan’s financial advisor or broker in order to receive the most accurate and relevant information. As a matter of policy and ethical considerations, Randall & Hurley does not provide investment advice to participants or plan sponsors.

What is automatic enrollment?

Automatic enrollment (also referred to as "negative" or "passive" election) requires participants to elect not to have their pay contributed to the plan. Participants who do nothing will have a certain percentage of pay automatically contributed to the plan. Automatic enrollment can be used in 401(k) plans and certain 403(b) and 457 plans.

The IRS allows automatic enrollment if employees are sufficiently notified. Automatic enrollment can apply to current and future participants. This notice must include certain elements, be distributed annually and is best prepared by a TPA, like Randall & Hurley.

Automatic enrollment can increase participation levels and help employees save for retirement.

How can employees contribute to the plan? What is a catch-up contribution? A Roth contribution?

Depending on your plan type, employees can make several types of contributions.

Pre-Tax Contributions. Pre-tax contributions are made before income taxes are deducted. Participants defer the payment of taxes until retirement (or until the account is withdrawn). Amounts are deposited within 5 business days and accumulate interest over time. The contribution limit changes each year and is updated in our What's New content area.

Catch Up Contributions.If a participant will be age 50 or older, he/she may make an additional pre-tax contribution, called a catch up contribution. (This provision became effective January 1, 2002 by way of the Economic Growth and Tax Relief Reconciliation Act of 2001, or EGTRRA). The catch up limit changes each year and is updated in our What's New content area.

After-Tax Contributions. Many plans allow employees to contribute to their plan accounts on an after-tax basis. These contributions have already been subject to federal income tax, and accrued earnings and are treated as part of your plan balance. When withdrawn, income taxes are not deducted from the amount (since the taxes were paid before the money entered the plan). After tax contributions are also called voluntary contributions.

Roth Contributions. Roth contributions allow participants to contribute money to the plan after it has been taxed, where contributions and earnings grow tax free. No taxes will be due at retirement, provided certain requirements are met: The distribution must be made after the 5 year period that starts with the first year a Roth contribution was made AND the participant is: (1) aged 59½ or older, (2) disabled, or (3) deceased.

What happens if I can't find a former employee who has a balance?

The first step is to try to locate the participant. This can be done by using the IRS Letter Forwarding Program, the Social Security Administration Letter Forwarding Program, or by hiring a private locator service. The two letter forwarding programs allow plan sponsors to "forward" a letter to the participant through the specified agency, using its address records.

If the assets are required to be distributed, as is the case in a plan termination, distributions can still be made without the participant's consent, even when his or her vested balance is over $5,000, so long as the plan doesn't offer an annuity option as a form of payout, the plan is not a money purchase or target benefit plan, there is no other employer plan, and there is no other plan among any employer of a controlled group to which the employer belongs.

If every effort has been made to locate the participant and the above criteria are met, the plan sponsor has the ability to distribute the participant's account. In this case, every effort should be made to protect the participant's benefit. This might mean withholding 100% of the distributable amount as federal income taxes, establishing an IRA in the participant's name at a reputable financial institution, or forwarding the benefit amount to your state's Unclaimed Property Department.

Can we charge the fee for a distribution directly to the participant?

Yes, provided you charge the fee for every participant in the plan. Occasionally, a plan provider may not allow fees to be charged directly to participants. For example, if you choose to use the American Funds’ Recordkeeper Direct program, you will not be able to charge fees directly to the participant.

What do we do if a participant dies and the beneficiary is a minor?

Naming minor children as beneficiaries may cause unforeseen problems. Generally, retirement plans cannot pay death benefits to minors.The benefits will be held until they could be made to a court-approved guardian and/or trustee of a children’s trust. A guardian, trust, or trustee should be named beneficiary to help ensure competent management of the proceeds for the children.

What do we do if a participant dies and there is no beneficiary form on file?

In the event no valid Designation of Beneficiary exists, or if the beneficiary designated is not alive at the time of the participant's death and no contingent beneficiary has been designated, then the death benefit will be paid in the following order of priority:

the participant's surviving spouse
the participant's children, including adopted children, per stirpes
the participant's surviving parents, in equal share
the participant's estate

What items are considered by the IRS to be acceptable reasons for a hardship withdrawal?

Currently, there are six permitted events that allow participants to apply for and receive a hardship withdrawal. Be sure to check your plan document, however, because your plan document may not allow hardship distributions for every event listed here. You should also make sure the participant completes a hardship application form and provide evidence of the hardship.

Here are the six permitted events, along with our suggestions of appropriate supporting documentation for each item:

Medical Expenses for Participant or Dependent. The participant should provide a copy of bill, along with an insurance company benefit statement denying coverage for at least the amount being requested. If the expense has not yet been incurred, you could require a signed letter from a doctor or other health care provider verifying the need for treatment and the approximate cost.
Purchase of Principal Residence. The participant should provide a copy of the signed purchase agreement.
Twelve Months Tuition and Related Costs. The participant should provide a bill or letter from the educational institution, verifying enrollment of the participant or his/her dependent and the estimated costs of tuition, room, board and related expenses.
Payments to Prevent Eviction or Foreclosure. The participant should provide a copy of the formal legal document giving notice of the eviction or foreclosure. This notice typically states when the overdue rent or mortgage payment is in order to prevent eviction or foreclosure.
Burial or Funeral Expenses. The participant should provide copies of the death certificate and the bill from the funeral home showing costs of the burial or funeral.
Repair to Employee's Principal Residence That Qualifies as a Casualty Deduction. The participant should provide evidence of the casualty (a description or photograph), a copy of the repair bill, and proof that insurance proceeds did not cover the amount of the casualty expense claimed as a hardship.

FREE PLAN ANALYSIS

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