automatic cashout violation

[Guest britneyspears]

What's the EPCRS correction for a plan that violates its automatic cashout rules (plan recently dropped down to lump sum distributions for amounts of $1,000 or less)?

[Guest hyper]

What was the violation ? Was it mandatory distribution of amount over $1,000 without consent ?

[Guest britneyspears]

Plan failed to cashout certain participants back when $5,000 limit applied, e.g., balances of $3,600. It dropped automatic cashout limit to $1,000 without realizing some participants hadn't been cashed out. Now it knows, & wants to cash them out, but the new $1,000 limit is in place.

[mbozek]

Check plan language to see if there was a violation of the old distribution rules. Many plans do not provide for a specified time for making distributions but use terms as when administratively feasible or when determined by Plan admin, etc. Second, plan may not be out of compliance if amendment applies to all distributions after 3/28/05 and these distributions are made after such date.

[Guest hyper]

I agree with Mbozek: Confirm when the $5,000 cash outs were required to be completed. If plan is silent or has an ASAP standard, it does not seem to be a big issue.

The Plan ccould still be amended back to the required $5,000 cash-out, just need to rollover to IRA if no consent over $1,000.