Low balance fees for terminated participants

[Guest mmc]

A speaker at a recent conference advocated charging low balance fees to terminated participants with small balances as an alternative to locating missing participants. The speaker suggested $5.00/quarter until the account was zero.

We have a plan we tookover with more than 20 terminated participants with QNEC balances under $50 who terminated years ago. It is a reasonable assumption that the combined administrative costs between our effort and the client to locate these participants, issue checks and 1099's will exceed the distributable amounts.

Any thoughts or experience with low balance fees?

[rcline46]

Does the plan have force out language for under $5000? Was an amendment adopted/ will be adopted for automatic rollovers?

You must follow the terms of the document in regard to distributions first.

If you want to charge fees to terminated participant accounts, they cannot be higher than the fees paid by the employer for active participant accounts, and the plan must be so amended, and the terminated participants must be notified before you can charge the fees.