Forced Distributions for DC Account balances between $200-$5000 and Participant Consent

[Guest MSP]

Help. I have always thought that when forcing a particpant's distribution from DC plan and their balance is between $200 & $5000, the participant must receive at least a 30-day notice. I have been questioned about this and need to "prove" my stance. Am I wrong? Can anybody give me the reg or guidence? What must the notice include - I've always provided a distribution form, tax notice and the deadline for returning the form or they will receive a lump sum less the 20% w/h. Thanks.

[E as in ERISA]

See Section 402(f) and related regulations. If the distribution is eligible for rollover, you must provide the required tax notice at least 30 days before distribution (although they can waive the 30 days).

[ERISAatty]

Part of the function of providing notice is to comply with Code section 401(a)(31), requiring that qualified plans allow eligible distributions to be rolled over. However, Treas. Reg. 1.401(a)(31)-1, Q&A-11 provides that distributions under $200 need not be provided the direct rollover option.

It's true that for distributions under $5000, the consent/notice requirements of Code section 411(a)(11) don't apply.

But, for a distribution between $200 and $5000, you would still need to give the rollover notice. The rollover notice must be provided between 30 and 90 days before the distribution, as per Treas Reg. 1.402(f)-1, Q&A-2. That section also explains that if the distributee receives the notice, then elects to receive the money sooner than 30 days after the notice, that is fine.