Involuntary Force out at Normal Retirement Age >$5,000

[justanotheradmin]

Assuming the plan document allows - can a 401(k) plan force out terminated participants, who have attained normal retirement age, and have a vested balance over $5,000 (no rollover) ? If it can be done, I'm sure it would be to an IRA (or annuity if that is the plan's default payout form), not as cash.

Mind you - this would not be part of a plan termination in any way. It would strictly be due to age.

I had never heard of such a thing outside the context of a plan with annuities. but today, as part of John Hancock's webinar series, Kimberly Martin's presentation on distributions seemed to have stated exactly that.

From part of her slide:

Terminated at age 65 (NRA)

$100,000 Deferral

$50,000 Match

$150,000 Balance

--> No consent required

-->Default form

Is she talking strictly about plans with an annuity as the default form of payment? Most of the 401(k) plans I work with have no annuity provisions.

For a plan with no annuity provisions, and the force out would be to an IRA, is the force out still possible? (assuming of course all of this is in the plan's doc)

Anyone have a regulation? other citation?

[justanotheradmin]

Please ignore my post! I answered my own question!

[GMK]

This, from 411(a)11, may help (and the Plan Doc should specifically authorize force outs to terminates at or after NRA):

(4) Immediately distributable. Participant consent is required for any distribution while it is immediately distributable, i.e., prior to the later of the time a participant has attained normal retirement age (as defined in section 411(a)(8)) or age 62. Once a distribution is no longer immediately distributable, a plan may distribute the benefit in the form of a QJSA in the case of a benefit subject to section 417 or in the normal form in other cases without consent.

(5) Death of participant. The consent requirements of section 411(a)(11) do not apply after the death of the participant.

(6) QDROs. The consent requirements of section 411(a)(11) do not apply to payments to an alternate payee, defined in section 414(p)(8), except as provided in a qualified domestic relations order pursuant to section 414(p).

[Belgarath]

In my experience, many documents either automatically allow a participant to postpone distributions, or in the Adoption Agreement allow the employer to choose whether or not to require the mandatory forced distribution.

The mandatory forced distribution isn't a popular option, (in our plans, anyway) as the people who generally want to delay it the longest seem to be the higher paid owners.