If a distribution check has not been cashed, is the plan considered pa

[Guest Mindy]

We have a plan that terminated with a last day of 2/28/00. At 2/28/00 they had 1 check that was written but the participant has not cashed it. Can the 2/28/00 be the final filing date - i.e. accrue the distribution?

[BeckyMiller]

For what it is worth - I would say yes, you can treat it as terminated. In making this response, however, I am assuming that the check was issued pursuant to plan terms - any required signatures, notices, etc. are on file.

[Kirk Maldonado]

I agree with Becky Miller, assuming that the participant actually cashes the check. However, if the participant does not cash the check (i.e., the participant cannot be located), I'm not sure that you would get the same result. In such a situation, you would still have assets remaining in the plan, which would trigger the need to file another Form 5500 for the following year (or partial year).

[Guest kurt johansen]

I ran into a similar situation with an uncashed check last year. There was no plan termination involved. Instead, the employee quit his job and requested a distribution. His wife consented even though they were apparently separated at that time. A few days later the employee shot and killed his wife's boyfriend and held her hostage at gunpoint for several hours. He is now serving a life term in prison. He has never cashed the check and we suspect that his brother may be holding it for him. The ex-wife got a divorce decree that gave her all of his benefits under the plan plus all of his social security benefits! I was asked to determine if we could recognize the divorce decree considering that we had already distributed a check to the participant. We were concerned that we had no right to cancel the check. I was unable to find anything that would suggest whether a distribution had occurred and whether we should cancel the check and make a distribution to the ex-wife.

I would love to hear anybody's opinion.

Kurt

[david rigby]

Is the participant "missing", or is the checked uncashed for some other reason (perhaps even death)?

If the participant is missing, and this is a DB plan, I suggest using the PBGC Missing Participant program.

http://www.pbgc.gov/forms/XAMISS.htm

If this is a DC plan (without annuity options), you might wish to use the newly proposed technique of issuing the benefit to an IRA.

[Guest carsca]

Pax,

Could you please elaborate on this technique. I have a client with the same issue for a terminating plan and would like to be able to force the money out someway. In my case, however, the participant is not missing.

[david rigby]

Revenue Ruling 2000-36 states that a plan can be amended to define the default distribution as an IRA, under certain cricumstances.

http://www.benefitslink.com/IRS/revrul2000-36.shtml