Automatic Rollovers for Mandatory Distributions

[mming]

I think I've read too many interpretations from too many sources and now need clarification. Regarding the reduction of the $5,000 threshold, I am under the impression that if it's reduced to $1,000 and a missing participant has a vested interest of <$1,000, the trustee does not have to automatically roll it over into an IRA for the participant. In other words, nothing changes in regards to distributions of <$1,000.

If this is true, why would a plan consider decreasing the threshold below $1,000 or even bring it down to $0? Eliminating it completely would force terminated participants with vested interests of <$200 to fill out election forms where they previously were not needed. All help is greatly appreciated.

[Guest EagleEyes]

You are correct - the provisions do not change for distributions under $1k.

I agree - I do not know why a plan sponsor would eliminate the automatic cashout provisions. I would even question decreasing it to $1k. There are reasons why plan sponsors put in the auto cashout provisions in the first place and there are plenty of resources out there to handle the IRA rollovers.

[Guest sarnold]

I have seen this question before, actually, there is often confusion as to which limit is being reduced to less than $1,000. Many employers are reducing the $1,000 limit to zero, in otherwords making rollovers for all distributions from $0 to $5,000. This allows them to have one distribution process for <$5000 distributions.

Sean.

www.bpas.com/media/AutoRollover.pdf

[E as in ERISA]

Did they change the signature rules? I thought that the only accounts that are excepted from the signature rules for banks are those within the $1,000 to $5,000 category subject to auto rollovers. How can the bank accept under $1,000 without the participant's signature?

http://www.occ.treas.gov/10.pdf