involuntary distributions

[Santo Gold]

I already know the answer: Read the document, but I have to ask anyways:

Is a plan required to execute automatic distributions? That is, if the plan contains language saying amounts under $1,000 can be distributed without consent via cash distribution, does that mean the plan sponsor has to force people out? Our, for this example, the sponsor does not want to deal with automatic rollovers for amounts between $1,000 - $5,000, but the document contains that language. Is the sponsor required to make auto rollovers?

Thanks

[Guest Sieve]

The employer cannot use discretion when determining whether a type of distribution--including an involuntary distribution--is to be made. So, if involuntary distributions are in the plan document, then the answer is Yes they have to be made if the document mandates involuntary distributions, but No they don't have to be made if the plan simply permits involuntary distributions and if the employer has chosen simply never to execute that type of distribution. So . . . read the plan document (and see Treas. Reg. Section 1.411(d)-4, Q&A-4(a)).

[Bird]

Some pre-approved GUST documents have language that says the plan "may" force out. Whether that was something that slipped through on the IRS approval process or what I don't know, but I think any EGTRRA documents will have to specify exactly when money will be forced out.

[Santo Gold]

What if this is a volume submitter document and the plan states that amounts between $1,000 and $5,000 must be paid out via IRA rollover as desingate by the Plan Administrator (if the participant makes no other affirmative election). The VS has no alternative provisions for involuntary distributions. Since VS documents are permitted to have several minor modifications to them outside of the choices presented, would something like this qualify as a minor modification? I.E., do away with the $1,000 - $5,000 rollover, and just allow for cash outs under $1,000?

I realize that there is probably no certain answer to this, but what do you think?

Thanks

[Bird]

I lean towards it being a minor modification, but I also think that if your VS document comes from a major provider, that there is probably an option to cap forceouts at $1,000 (or some other number). Keep looking and/or contact the provider and explain what you're trying to do.

In other words, the automatic rollover language is required boilerplate stuff, but there is or should be another place to cap forceouts.

[QDROphile]

If a volume submitter document does not have an option for involuntary distribution at $1000 instead of $5000, that is enough evidence of incompetence that the plan should go elsewhere for a document.