Terminated Participants - VERY Small Balances

[KateSmithPA]

We have inherited a large plan that uses individual brokerage accounts for the plan's investment. That is, every participant has his or her own brokerage account. Several of the accounts of terminated participants have balances below $10. One of them has $0.83.

Is there a de minimus balance at which the participant does not have to be paid out, but the funds can be forfeited? It is clearly going to cost more than $0.83 to distribute that balance.

Thank you.

Kate Smith

[Kevin C]

I'm guessing the reason they have not been paid is that they can not be located? Does the plan have a provision for forfeiture of missing participants? Our VS document allows the forfeiture of balances that can be involuntarily distributed if the participant is missing after a reasonable search.

Another option is to amend the plan to have the auto rollover rules apply to all balances less than $5,000. Although, for those with vested balances less than what the IRA provider charges for the first year, we have been forfeiting the vested balance instead of giving it to the IRA provider for fees. If the terminated participant ever shows up, the forfeited balance gets restored.

[masteff]

I'm guessing the reason they have not been paid is that they can not be located?

It can also be caused by automation.... A large national investment firm had a computer system that would not run deminimis cashouts on anyone who had previously received a complete lumpsum distribution... the problem was they would post subsequent earnings (especially money market paid at the end of the month) resulting in this type of small and silly balance.

But I can't remember if we had a dollar threshold for forfeiting or if I'm confusing that w/ our loan policy which closed out any loan balance less than $5.

[GMK]

Here's a couple previous threads:

http://benefitslink.com/boards/index.php?s...=25845&st=0

http://benefitslink.com/boards/index.php?showtopic=47618

Good luck.