Automatic rollovers and fees for distribution

[E as in ERISA]

Participant has $1,010 account balance. Participant accounts are charged $20 for distributions. Is that a cashout or automatic rollover?

[Archimage]

That is a good question. I would think it would be an automatic rollover in this case. My answer is based on the actual account balance before any expenses. What if his balance is $5,010? You can't force him to do anything at that point. I would use the same logic in this situation as well.

[Everett Moreland]

My vote is as follows:

1. The auto rollover rules apply to "a distribution . . . in excess of $1,000," so the statute does not require an auto rollover where the distribution is $990 (because the fee has reduced the account from $1,010 to $990).

2. But the answer may depend on how the plan document is drafted and interpreted. If drafted to require auto rollovers where the accrued benefit exceeds $1,000, and "accrued benefit" is interpreted to be before the fee, then you might conclude that the plan document requires an auto rollover.

[austin3515]

In my opinion, this is not quite the old chicken and egg related...

You don't get to charge a fee unless you do a distribution, and you can't do a distribution if the balance is over $1,000.

I'm with Archimage.