Mandatory Cash Out

[Guest ebailey]

We are changing our mandatory cash out threshold to 5k and instituting a rollover IRA (per safe harbor). Notice 2005-5 states that we wont fail the notice requirements if our notice is sent back via US mail. However, FAB 2004-02 (which as you probably know deals with termianted DC plans) - talks about how to find missing participants. Does anyone have any thoughts / insights on what the common industry practice is? Are plans just sending out notices to missing participants prior to setting up mandatory rollover IRAs or are they going through the hoops of FAB 2004-02 (certified mail, forwarding service etc). I think we would be "safe" with just sending out via mail and would save a lot of time this way but don't wait to go against industry standards.

thanks

[K2retire]

I don't know that it is necessarily industry standard, but many receiving institutions won't accept the rollover if you don't have returned mail from the address that you're using.

[QDROphile]

I don't think the "new" rollover requirements change the old fiduciary duty to try to contact the participant for distributions. If the participant appears to be lost rather than simply unresponsive, then the lost participant standards apply, and would require reasonable efforts, including use of a government forwarding program, to contact the participant. You might be able to distribute to an IRA in the interim (subject to institutional squeamishness about having an unknown customer), but contact efforts need to be pursued if only to notify the lost participant where the distribution went.