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Non-responsive participants


Guest CWM

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We have a 401(k) that is being terminated. A handful of former employees with balances above $5000 have not responded to requests to complete distribution paperwork. They are not missing, as their addresses are correct. What steps need to be documented before we transfer their assets into IRA accounts?

The custodian will not release the funds until all distribution paperwork has been received, so these few are holding up the whole process for the rest the participants.The former employees have already received multiple mailings with the paperwork.

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The custodian should release the assets as soon as he gets the paperwork form Participants or the trustee. I would tell the trustee to direct the custodian to pay out all assets after reasonable efforts have been made.

You said that several letters have been sent. Were any of them certified?

I don't think certified is required. On Plan termination, having more than $5,000 means nothing. The auto IRA is a viable option. IMNTBHO

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  • 1 year later...
The custodian should release the assets as soon as he gets the paperwork form Participants or the trustee. I would tell the trustee to direct the custodian to pay out all assets after reasonable efforts have been made.

You said that several letters have been sent. Were any of them certified?

I don't think certified is required. On Plan termination, having more than $5,000 means nothing. The auto IRA is a viable option. IMNTBHO

Is there a need to go through the procedures described in FAB 2004-2 (certified mail, beneficiaries, IRS letter forwarding program?) We think the participants are simply being nonresponsive.

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Don't overlook the possibility that some participants are non-responsive because they are deceased.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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That is a good point. We have about 3 or 4 who have not responded. We could take the time to go through the IRS letter forwarding program, but that takes time and we really do not want to delay the plan's termination any further as we wrap up the dissolution and liquidation process.

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