Small Accounts-Distribution Fees

[Randy Watson]

If a TPA's distribution fees exceed a participant's account balance, is there any justification for simply eliminating the account upon termination of employment? For example, assume a participant's account is valued at $55 and the distribution fee is $65. Can you apply the distribution fee against the account and zero out the account?

The TPA is suggesting that this is permissible. How can you apply a distirbution fee to an account if the distribution is never made?

[rcline46]

If the distribution fee is reasonable, then this is not a problem. The TPA could even request (in your example) the sponsor make up the difference.

[Randy Watson]

If the distribution fee is reasonable, then this is not a problem. The TPA could even request (in your example) the sponsor make up the difference.

Good to know. Thank you.

[Jim Chad]

Some people call it a "Dormant account closing fee"

[Belgarath]

Just make sure any such fee paid from plan assets has been properly disclosed in advance under the fee disclosure regulations.