Mandatory cash out (IRA) question

[k man]

the plan was amended so that only accounts less than 1000 can be cashed out. there are no mandatory IRA's because the limit has been reduced to 1000.

if the plan terminates, what does the plan administrator do with accounts that are between 1000-5000 if the participants don't complete distribution paperwork?

[ERISAnut]

Not sure if I remember this correctly since this is new, but I am under the impression that the new automatic rollover rules may apply to terminating plans. When the plan is terminating and a participant is missing, it would stand to reason that these same principles would be used to house the funds.

The ultimate key to remember is that a participant is not "missing" until he is required to receive a payment under from the plan. In plan termination, since the assets would have to be paid out within 12 months, all participants are required a payment. Hence, the automatic rollover for missing participants would apply.

[k man]

i guess i am still wondering, if the plan has been amended to eliminate involuntary cashouts over 1000, what would you do if you have accounts between 1-5k?

the plan says you must purchase an annuity for people with more than 5,000..

[ERISAnut]

It seems you are talking about a DB plan. You follow the terms of the plan. The plan should have language of what you do upon plan termination. You follow those rules. Involuntary cashouts are an option for vested balances that do not exceed $5,000. If you fail to elect that option, then you would treat a balance between $1K and $5K the same as you would treat balances between $100K and $500K.

Nothing is arbitrary. You follow the plan.

[Archimage]

If this is a DC plan and your doc is silent on the issue, you should use the DOL's FAB 2004-2 for your procedures.