Jump to content

Cashout when rollovers are involved


BG5150

Recommended Posts

Plan doc excludes rollovers when determining the cashout balance.

Participant has $550 PS (100% vested) and $45,000 Rollover.

Because R/O is excluded, this participant is a candidate to be cashed out.

Does the trustee just cash out the entire account and withhold $9,100?

Or do they roll over the balance to an IRA?  (The plan's threshold for IRA rollovers is $1,000)

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

Link to comment
Share on other sites

Roll it over to an IRA. From Notice 2005-05:

Quote

Q-14. Are amounts attributable to rollover contributions that exceed $5,000 subject to the automatic rollover provisions of § 401(a)(31)(B)?

A-14. Yes. Section 401(a)(31)(B) applies to the entire amount of a mandatory distribution. Thus, for example, the portion of the distribution attributable to a
rollover contribution is subject to the automatic rollover requirements of §401(a)(31)(B), even if that amount is excludable (under § 411(a)(11)(D)) from the
determination of whether the present value of the nonforfeitable accrued benefit exceeds $5,000. 

 

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...