Disregarding rollover in determining < $5,000 balance for forced payout.

[MarZDoates]

When a plan permits disregarding of rollover account balance in determining whether there should be a forced payout (less than $5,000), is the entire account balance forced out (including rollover) or just the portion attributable to sources other than rollover?

Can you provide cite? Thanks.

[SoCalActuary]

You start with the provisions in the plan document. Look for the treatment of rollover funds, and the duties of the plan administrator after an employee terminates.

Generally, benefit managers don't like to keep accounts for terminated employees, in part because of the fiduciary duty, but even more for the notification requirements.

There is a large market of IRA providers who want the rollover of the funds. Generally they can invest in the same style funds and investment choices of the employer plan, so the participant is not hurt by rolling their funds.

[mbozek]

Note today's thread under under 401K) plans - missing participants. Under USA Patriot Act plan cannot transfer participants account to IRA without employees signature on the IRA application.

[Harwood]

I assume this EGTRRA model amendment is using language provided by the IRS. The answer to the original question is in the last sentence:

"For purposes of the Sections of the plan that provide for the involuntary distribution of vested accrued benefits of $5,000 or less, the value of a participant's nonforfeitable account balance shall be determined without regard to that portion of the account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Sections 402©, 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the participant's nonforfeitable account balance as so determined is $5,000 or less, then the plan shall immediately distribute the participant's entire nonforfeitable account balance."