Terminated Participants

[Nassau]

What are the rules pertaining to terminated participants over the age of 65 with account balances greater than $5,000? Can they be forced out of the plan and required to take their account balances?

[mbozek]

What are the rules pertaining to terminated participants over the age of 65 with account balances greater than $5,000? Can they be forced out of the plan and required to take their account balances?

What are the plan rules?

IRC only requires that benefits be payable not later than age 65. Participant consent for distributions over 5k is required unless the participant has reached later of normal retirement date or 62.

DB plan with required distribution date of 65 could commence distribution age 65 as either single life annuity or J & S annuity w/out employee's consent if employee did not elect to commence distributions. Plans can defer MRD to 70 1/2 for all employees and beyond that date for non 5% owners who continue active employment with plan sponsor.

Problen exists for distributon if plan does not know employees current address or know if employee is alive. Check SS registry.

Some plans will deem employees benefit forfeited at 70 1/2 if employee cannot be located to avoid violating MRD rules.

[K2retire]

IRC only requires that benefits be payable not later than age 65. Participant consent for distributions over 5k is required unless the participant has reached later of normal retirement date or 62.

Our FT William document includes language along the lines of what you said above. But we have a recordkeeper pushing back saying that you must get participant consent over $5,000 at any age. Can you direct me to the apprpriate IRC section to show them?

[mbozek]

IRC only requires that benefits be payable not later than age 65. Participant consent for distributions over 5k is required unless the participant has reached later of normal retirement date or 62.

Our FT William document includes language along the lines of what you said above. But we have a recordkeeper pushing back saying that you must get participant consent over $5,000 at any age. Can you direct me to the apprpriate IRC section to show them?

1.411(a)-11©(4). Immediately distributable benefits. Also benefit can be distributed without consent after participant's death. see ©(5).

Maybe Im old school but when does a recordkeeper get to override the terms of a plan? I thought they were supposed to follow the plan terms.

Edit: Ask the recordkeeper what happens at 70 1/2 if plan cant get participant's consent for distribution?

[K2retire]

1.411(a)-11©(4). Immediately distributable benefits. Also benefit can be distributed without consent after participant's death. see ©(5).

Maybe Im old school but when does a recordkeeper get to override the terms of a plan? I thought they were supposed to follow the plan terms.

Edit: Ask the recordkeeper what happens at 70 1/2 if plan cant get participant's consent for distribution?

Thanks for the cite.

I agree that they are supposed to do what they are told, but when completing the forms asking them to automate the process one sometimes has to adjust one's expectations. It was when I challenged the choices on their form that they started objecting.

P.S. The recordkeeper has quit challenging the validity of the document provision and simply stated that their system is not able to automate the process if the balance is over $5,000.