Automatic Rollover - Amounts under $1,000?

[Guest ircreader]

Does anybody have an opinion regarding the provision in the final regulations re automatic rollovers that states the following:

"(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 © of this section, without

regard to the fact that such rollover is

not described in section 401(a)(31)(B) of

the Code."

Does this mean that if you do a mandatory cashout of $1,000 or less when you have an unresponsive participant and don't roll it into an IRA, you're not protected?

[E as in ERISA]

You can't roll cashouts less than $1000 nto an IRA because vendors won't accept them without a signature.

[Guest ircreader]

Please see the regulations. The whole idea behind these regulations is to provide for an automatic rollover rather than the mandatory cashout because the participant is unresponsive. The regulations anticipated this and made provisions for it otherwise you wouldn't be able to roll the amounts >$1,000 <$5,000 either.

[Guest rmeigs]

ircreader:

My interpretation is that this section simply gives the same "safe harbor" protection you get when making mandatory distributions of >$1,000 <$5,000 to an IRA on amounts under $1,000 -- if you choose to follow this route. As Katherine indicated, the problem will be trying to find someone who will take them.

Does this mean that if you do a mandatory cash out of $1,000 or less when you have an unresponsive participant and don't roll it into an IRA, you're not protected?

You have the same “protection” you have today. This rule doesn't take away anything on the under $1,000 distributions.