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just to clarify, I believe in plan transfers are optional, not required.

Based on your post, I'm assuming these dollars have actually been allocated to participant accounts. Assume that a participant is 100% vested in his or her accrued benefit. In a defined contribution plan, the participant's accrued benefit at any point in time is her or her account balance. How could you possibly justify removing these amount from the participant's account?

and don't forget code section 401(a)(14): (14) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which— (A) the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan, (B) occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or (C) the participant terminates his service with the employer.

FWIW, IRS agreed with this in 2004: 14. §401(a)(9) – Required Minimum Distributions and Date of Retirement Treas. Reg. 1.401(a)(9)-2, A-2(a) provides that except in the case of a 5%-owner, the “required beginning date” is April 1 of the calendar year following the later of the calendar year in which the employee attains age 70-1/2 or the calendar year in which the employee retires from employment with the employer maintaining the plan. If December 31, 2003 is the employee’s last day at work, and the last day for which he or she is paid or entitled to payment of wages, is that the date of “retirement”. Or is January 1, 2004, the first day the employee is not employed, the retirement date? When is the employee’s required beginning date? Proposed response: "Retirement” is the last day worked, not the definition of retirement date in the plan. What date is an employee’s last day worked is a facts and circumstances determination. The facts and circumstances are based on the employer’s practice concerning the last day an individual is considered an employee. IRS response: The IRS agrees with the proposed response and noted that they have never defined “retirement.” Based on the facts in the described situation, the participant’s date of retirement would be December 31, 2003. https://www.americanbar.org/content/dam/aba/migrated/2011_build/employee_benefits/2004_irs.authcheckdam.pdf

I believe the last day rule historically carried with it a "separation from service" requirement to justify not providing an allocation to an employee who had otherwise met the eligibility rules. Since the controlled group rules apply to section 410, I think an argument could be made that the employee is legally entitled to an allocation if he is still employed within the controlled group. However, setting out the specific legal argument for this would require a bit of research and time.

One thing that's changed is that plans using the safe harbor hardship rules can now allow self-certification by employees that their hardship withdrawal meets the "immediate and heavy need" requirement. See https://www.irs.gov/pub/foia/ig/spder/tege-04-0217-0008.pdf Plans using self-certification could, for example, instead of asking for actual medical bills ask for a summary of the medical expense. This would include "What was the purpose of the medical care (not the actual condition but the general category of expense, for example, diagnosis, treatment, prevention, associated transportation, long-term care)?" This could provide a backdoor way for plans to avoid having to seek delicate medical information from employees. Note, though, that the employee would still need to maintain the actual bills and provide them to the employer upon request.

I believe insurance premiums for medical care are eligible for hardship distribution only if the premiums are not paid on a pre-tax basis. Obviously other requirements may also apply if the plan doesn't use the safe harbor hardship distribution rules.

As a practical matter, how much have you lost so far? Ie, have the stocks gone up or down in the last three trading days? How much are the transaction fees for the sales? If its a minimal loss the path of least resistance may be to transfer the cash to your IRA and repurchase the stock. If the stocks have gone down since the sale you may even be ahead of the game.

Shouldn't be a problem. Have Boards of Directors vote to change sponsorship, and report new sponsor where indicated on 5500. Also take a look at IRS discussion of this general issue here. (This is not legal advice, etc etc etc...)

Here's the Conference Committee explanation. No clarification of effective date: Conference Agreement: The conference agreement follows the House bill and the Senate amendment with a modification. Under the provision, the special rule that allows a contribution to one type of IRA to be recharacterized as a contribution to the other type of IRA does not apply to a conversion contribution to a Roth IRA. Thus, recharacterization cannot be used to unwind a Roth conversion. However, recharacterization is still permitted with respect to other contributions. For example, an individual may make a contribution for a year to a Roth IRA and, before the due date for the individual’s income tax return for that year, recharacterize it as a contribution to a traditional IRA. Effective date. The provision is effective for taxable years beginning after December 31, 2017.

ESOP Guy said: "If someone thinks you can't force out <$1k to an IRA please speak up." I think you can force out <$1k to an IRA, but I'll speak up anyway... On the ERISA side, the DOL's regs specifically allow automatic rollovers of $1,000 or less. See §2550.404a-2(d): "(d) Mandatory distributions of $1,000 or less. A fiduciary shall qualify for the protection afforded by the safe harbor described in paragraph (b) of this section with respect to a mandatory distribution of one thousand dollars ($1,000) or less described in section 411(a)(11) of the Code, provided there is no affirmative distribution election by the participant and the fiduciary makes a rollover distribution of such amount into an individual retirement plan on behalf of such participant in accordance with the conditions described in paragraph (c) of this section, without regard to the fact that such rollover is not described in section 401(a)(31)(B) of the Code." On the tax side, I don't believe the IRS has ever specifically stated that distributions of $1,000 or less can be automatically rolled over, but they also haven't said they can't be (and they've had plenty of time to do so...) And section 401(a)(31)(B) doesn't specifically prohibit it. (And presumably many plan documents have been approved with this language.) (Copied from my response in a similar thread here.)

Good article by Ed Slott from Dec. 4. Don't think anything has changed yet. https://www.onwallstreet.com/news/new-tax-bill-no-more-roth-ira-do-overs

1. My 2 Cents said earlier: "How do you get around the ERISA/regulatory mandate that in-service withdrawals can only be made if the hardship rules are met?" The Service has said this isn't an issue. 1.72(p)-1, Q&A 12: "Q-12: Is a deemed distribution under section 72(p) treated as an actual distribution for purposes of the qualification requirements of section 401...? A-12: No; thus, for example, if a participant in a money purchase plan who is an active employee has a deemed distribution under section 72(p), the plan will not be considered to have made an in-service distribution to the participant in violation of the qualification requirements applicable to money purchase plans. Similarly, the deemed distribution is not eligible to be rolled over to an eligible retirement plan and is not considered an impermissible distribution of an amount attributable to elective contributions in a section 401(k) plan. See also § 1.402(c)-2, Q&A-4(d) and § 1.401(k)-1(d)(5)(iii)." 2. As to the general issue, this has been debated forever (as can be seen by the number of topics devoted to it here). I don't have much to add to the above, except that 1.72(p)-1, Q&A 19 requires that after a default, subsequent loans must be repaid by payroll deduction pursuant to an agreement "enforceable under applicable law." However, this is conditioned on the following: "For this purpose, an arrangement will not fail to be enforceable merely because a party has the right to revoke the arrangement prospectively."

Generally, if a 401(k) plan is using the safe harbor hardship rules, it can now allow employees to self-certify that a hardship distribution meets the "immediate and heavy need" requirement. See https://www.irs.gov/pub/foia/ig/spder/tege-04-0217-0008.pdf However, it's not clear if self-certification remains available where, as here, the employer already seems to have done some investigation and may have actual knowledge that the deceased may not be a dependent.

"Just to confirm how frustrating this continues to be - the financial institution has confirmed unequivocally that they will not put someone into pay status - not even to process an RMD - without the participant's consent. So even for participants whose whereabouts are known, if they haven't returned the consent forms, there has been no RMD." well, they may be disqualifying the plan. (a) reg. section 1.401(a)(9)-8: (While this section deals with RMDs while a benefit is immediately distributable and therefore subject to the consent rules, it would obvously be even more applicable where a benefit is no longer immediately distributable and therefore not subject to the consent rules:) Q-4. If a distribution is required to be made to an employee by section 401(a)(9)(A) or is required to be made to a surviving spouse under section 401(a)(9)(B), must the distribution be made even if the employee, or spouse where applicable, fails to consent to a distribution while a benefit is immediately distributable? A-4. Yes, section 411(a)(11) and section 417(e) (see §§ 1.411(a)(11)-1(c)(2) and 1.417(e)-1(c)) require employee and spousal consent to certain distributions of plan benefits while such benefits are immediately distributable. If an employee's normal retirement age is later than the employee's required beginning date and, therefore, benefits are still immediately distributable, the plan must, nevertheless, distribute plan benefits to the employee (or where applicable, to the spouse) in a manner that satisfies the requirements of section 401(a)(9). Section 401(a)(9) must be satisfied even though the employee (or spouse, where applicable) fails to consent to the distribution. In such a case, the plan may distribute in the form of a qualified joint and survivor annuity (QJSA) or in the form of a qualified preretirement survivor annuity (QPSA), as applicable, and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417. If, because of section 401(a)(11)(B), the plan is not required to distribute in the form of a QJSA to an employee or a QPSA to a surviving spouse, the plan may distribute the required minimum distribution amount to satisfy section 401(a)(9) and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417. (b) Reg section 1.411-11(c)(7): Section 401(a)(9), etc. The consent requirements of section 411(a)(11) do not apply to the extent that a distribution is required to satisfy the requirements of section 401(a)(9) or 415. See section 401(a)(9) and the regulations thereunder and § 1.401(a)-20 Q&A 23 for guidance on these requirements.

It is correct that whatever distribution she receives from the 401(k) plan will be as a surviving spouse beneficiary. But she has the same rollover rights as the participant would have had. So she can empty the account and directly roll over the entire distribution, minus the RMD for that year, into an IRA. She has the choice to roll over to an inherited IRA or to her own IRA. (She could even roll the dollars over to an inherited IRA and then at some later date treat that IRA as her own. There is no time limit for this election.) If she rolls the distribution over to her own IRA, she uses the Uniform Lifetime Table when calculating subsequent RMDs from the IRA, the same as her other IRA dollars. I have great respect for Principal, but I don't know of any rule that says that a surviving spouse who receives an RMD from a 401(k) plan forever loses her full rollover rights with respect to all future distributions--including the right to roll over to her own IRA and use the ULT. You should ask Principal for the statutory/regulatory authority for their position. usual disclaimers... not legal/tax advice, etc etc etc

I'm confused by this whole thread... You said: "I have read the recent memorandum on missing participants, it doesn't help much because the lost participants isn't the primary issue." If you know where these participants are, why haven't they begun receiving their normal retirement benefit? If you don't know where they are, how does the memorandum not help? Or is it nonresponders you're primarily concerned about? Just for curiousity's sake, you also said: "I suspect for some of the participants, if they received their RMD check in the mail, they would just cash it." what else might one do with it?

"Is there any number considered too low?" On the ERISA side, the DOL's regs specifically allow automatic rollovers of $1,000 or less. See §2550.404a-2(d): "(d) Mandatory distributions of $1,000 or less. A fiduciary shall qualify for the protection afforded by the safe harbor described in paragraph (b) of this section with respect to a mandatory distribution of one thousand dollars ($1,000) or less described in section 411(a)(11) of the Code, provided there is no affirmative distribution election by the participant and the fiduciary makes a rollover distribution of such amount into an individual retirement plan on behalf of such participant in accordance with the conditions described in paragraph (c) of this section, without regard to the fact that such rollover is not described in section 401(a)(31)(B) of the Code." On the tax side, I don't believe the IRS has ever specifically stated that distributions of $1,000 or less can be automatically rolled over, but they also haven't said they can't be (and they've had plenty of time to do so...) And section 401(a)(31)(B) doesn't specifically prohibit it. (And presumably many plan documents have been approved with this language.)

What QPhile said. The only way the money can get into the surviving spouse's participant account is if there is an eligible rollover distribution under 402(c) and a (presumably direct) rollover back into the plan. So the plan would obviously also have to accept rollovers. Once in the surviving spouse's participant account the 10% penalty and RMD rules would apply to the rolled over dollars the same way they do to any other dollars in the participant's account.

ok, I'll reveal my ignorance here (won't be the first or last time), but in my own defense it's been quite a few years since I've dealt with plan document issues... wouldn't it have been easier/simpler just to amend and restate into Fidelity's plan, and have Fidelity request an asset transfer from Vanguard as successor trustee?

Also see 1.408A-6 Q&A 7 which illustrates how to calculate the 5 year rule after the IRA owner's death. In your case, the non-spouse beneficiary would have to wait 5 years before distributions would be qualified and tax free: Q-7. Is the 5-taxable-year period described in A-1 of this section redetermined when a Roth IRA owner dies? A-7. (a) No. The beginning of the 5-taxable-year period described in A-1 of this section is not redetermined when the Roth IRA owner dies. Thus, in determining the 5-taxable-year period, the period the Roth IRA is held in the name of a beneficiary, or in the name of a surviving spouse who treats the decedent's Roth IRA as his or her own, includes the period it was held by the decedent. (b) The 5-taxable-year period for a Roth IRA held by an individual as a beneficiary of a deceased Roth IRA owner is determined independently of the 5-taxable-year period for the beneficiary's own Roth IRA. However, if a surviving spouse treats the Roth IRA as his or her own, the 5-taxable-year period with respect to any of the surviving spouse's Roth IRAs (including the one that the surviving spouse treats as his or her own) ends at the earlier of the end of either the 5-taxable-year period for the decedent or the 5-taxable-year period applicable to the spouse's own Roth IRAs.

Agreed. No breach. This isn't a plan decision, but an employer decision. It's a plan design issue, a "settlor" function, not subject to the fiduciary rules.

Thanks ESOP guy. what would you say if the SPD said this? "Matching Contributions will be deposited in your conditional Matching Contribution subaccount each pay period. You must be employed on the last day of the plan year (December 31), or die while in active service, in order to retain the Matching Contribution for the year." Note "your." (I've requested the plan doc.)

I think the fiduciary issue is an interesting one, but I'm still struggling with the allocation issue. Bri referred to the "technically-not-yet-allocated-to-them money." But cash has been allocated to the participant's account. Where are the rules that permit a "contingent allocation?" and where are the rules that allow a suspense account for those contributions that are ultimately "forfeited?" (btw this employer refers to the reduction as a "forfeiture.") The employer could have just adopted an end of year match to accomplish the same result. Thanks for all the input. card

There were a couple of threads on this subject back in 2000 but nothing since. Maybe that means it's settled law now. But here's the scenario. 401(k) plan applies the last day rule to the company match. It matches employee contributions each payroll period, but the match is placed (real dollars) in a "conditional match" subaccount within the employee's plan account. The employee has investment control over the subaccount, which accrues gains and losses. If the employee is not employed on the last day of the year, the subaccount is "forfeited." Back in the 2000 threads this was deemed perfectly acceptable, as long as the employee communications were clear. Is this plan design accepted practice now? I might argue on behalf of an otherwise 100% vested employee that his/her accrued benefit includes any amount allocated to the account, that there is no provision anywhere for "conditional allocations," that once real dollars are allocated to the subaccount they become part of the employee's accrued benefit, and that removing funds from the subaccount is a prohibited forfeiture under section 411. but I could be wrong...