Auto Rollover available?

[Sully]

401(k) Plan with no QJSA requirements provides for automatic cashouts for vested balances less than $1,000 and automatic IRA rollovers for vested balances between $1,000 - $5,000. A participant terminates back in 2009 and elects to do a rollover of his entire vested balance of $10,000. Later on the employer makes a profit sharing contribution to the participant’s account and he now has a vested balance in the plan of $1,500.

Question: Can we do an automatic IRA rollover of the $1,500 or do we have to take into account the prior distribution of $10,000 when determining if he is within the $1,000 - $5,000 range?

Thanks in advance for any comments.

[GMK]

We treat these cases like any other rollover eligible distribution. Send the distribution form and Rollover Options notice to the participant.

In the cover letter, explain that the Plan will distribute the balance using the same elections as for the previous distribution unless the participant files other instructions within 30 days.

We prefer to give the participant the opportunity to make an election before we consider a forced out distribution, even for amounts less than $1000.

[justanotheradmin]

Is this written anywhere? Like in an example from the DOL or IRS? Or does it just come down to understanding the meaning of "present value of any nonforfeitable accrued benefit" and since the prior distribution amount is no longer in the account, it is not part of the "present value" ? the prior distribution is part of a "prior value" ?

What would stop an employer from doing force out distributions in chunks then? For example, terminated participant has $800 vested account, gets a cash distribution under FO rules a few months after termination. ER decides to make a discretionay Match contribution of $400 at year end, ER does FO distribution #2. then 6 mos after that ER decides to do a discretionay PS, Participant gets $3800. ER does FO #3, this time to an IRA.

Thoughts?