Mandatory Cashouts

[Guest JM123]

May amounts "transferred" from another plan on a nonelective basis, as distinct from "rollovers," be excluded when determining whether an account does not exceed the $5,000 limit for mandatory cashouts under 411(a)(11)?

[david rigby]

Putting transferred in quotes may or may not be significant. Perhaps you can provide some more details?

[Guest JM123]

Putting transferred in quotes may or may not be significant. Perhaps you can provide some more details?

Thank you, David. A nonelective transfer that occurs where a plan is merged into another following a stock acquisition, for example. I understand that a transfer from one qualified plan to another that occurs where an employee changes employers is considered a "rollover contribution" and therefore may be disregarded when calculating the $5,000 threshold. (Please correct me if you believe otherwise.) But I don't think that a nonelective transfer is treated as a rollover contribution and therefore must be considered when determining eligibility for mandatory cashouts.

[Guest Salvador A Mander]

Putting transferred in quotes may or may not be significant. Perhaps you can provide some more details?

Thank you, David. A nonelective transfer that occurs where a plan is merged into another following a stock acquisition, for example. I understand that a transfer from one qualified plan to another that occurs where an employee changes employers is considered a "rollover contribution" and therefore may be disregarded when calculating the $5,000 threshold. (Please correct me if you believe otherwise.) But I don't think that a nonelective transfer is treated as a rollover contribution and therefore must be considered when determining eligibility for mandatory cashouts.

I believe that a "transfer" that does not result from any participant direction (i.e., plan #1 is terminated with assets automatically transferred to plan #2, or plan #1 merged into #2), then the transferred balances may not be disregarded for purposes of the involuntary cashout limit. But if a participant affirmatively elects to have his account transferred to Plan #2, that's treated as a rollover and can therefore be disregarded for 411(a)(11).

I am interested to hear other opinions.