Products November 8, 2022

Comparative 401(k) Tool Is Released To Public

The analytics tool is now available to plan providers, plan sponsors and plan participants.

Reported by

Plan sponsors and retirement plan advisers have a new tool to analyze 401(k) plans.

Benchmine Analytics is a comparative analytics engine that uses artificial intelligence to extract information from Department of Labor Form 5500, to provide the user with plan performance insights, explained creator and CEO of OnlyBoth, Inc., Raul Valdes-Perez. With the tool plan sponsors and retirement plan advisers can assess, compare, and score 401(k) plans through a digestible, easy to understand interface.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“For plan sponsors it is a way to understand their plans performance on different levels as well as understand performance against others within your industry,” said Valdes-Perez. “We hope to bring transparency and thereby drive improvements to the 401(k) sector by making this free and open.”

The tool draws from a storehouse of just-released 2021 Department of Labor data which includes data for every DC plan with $1 million or more in assets, that filed a Form 5500 Schedule H.

While anybody with an internet connection can download the Department of Labor Form 5500 and the Schedule H data, “making sense of it is a whole different aspect,” said Valdez-Perez.  

The current database includes 54,495 401(k) plans with $6.6 trillion in total assets, according to the website Benchmine.com. 

“That’s the subset that we’re analyzing [now, but] we could do 403(b)s in the future,” said Valdes-Perez. 

The analytics tool was initially made available for use of members of the Defined Contribution Institutional Investment Association, Plan Sponsor Institute and partner organizations. The partnership with DCIIA and PSI ended with the release of 2021 plan sponsor Schedule H and Form 5500 data, by the Department of Labor.

Ask the Experts November 8, 2022

What Kind of Payments Can a Hardship Request Cover When Buying a Home?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Reported by

We are a large health care provider that sponsors a 401(K) plan for our employees. I read your recent Ask the Experts column on the 401(k) rules for hardship distributions, which stated that one of the expense categories that constitutes an “immediate and heavy financial need” for hardship distribution purposes is “Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments)”. My question is: can a hardship request to cover costs directly related to the purchase of a principal residence for the employee include payoff of outstanding debts if that is what is required for the participant to qualify for the mortgage loan?

Kimberly Boberg, Taylor Costanzo, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Presuming that your 401(k) plan is satisfying the safe harbor method of determining what constitutes an “immediate and heavy financial need” for hardship distributions, and is including this particular expense as a category, probably not, though you should consult with retirement plan counsel on the specifics of this particular situation. The reason why it would probably not qualify is twofold.

 

  1. It is not a DIRECT expense of the purchase (satisfying debts unrelated to the residence in order to be able to qualify for a mortgage loan to purchase the residence is an indirect expense of purchasing the residence). Direct expenses of the principal residence generally include any cash down payment and any other cash due at closing, as opposed to cash due for other purposes related to home financing, such as mortgage payments or private mortgage insurance that is not due at the time of closing, as well as any other payments necessary for mortgage qualification.
  2. The hardship provisions as to what constitutes an “immediate and heavy financial need” are a safe harbor, meaning the plan sponsor is not required to follow them. As such, they are generally not intended to be interpreted broadly.

 

Of course, your plan can elect not to follow the safe harbor hardship withdrawal provisions and allow hardship distributions to be made for the reason you cited. However, upon audit, any determinations that you make with respect to hardship as a plan sponsor will be subject to a facts-and-circumstances review by the IRS, which is why many plan sponsors elect to utilize the safe harbor hardship provisions.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice. 

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

«