Participants with Small Balances counting as participants

[CLE401kGuy]

Plan started early 2000's and had elective and match only... match was suspended several years after the plan's effective date.

Forfeitures of match instead of being used to reduce future match were allocated across participants resulting in many balances under $10 - some even below $1. Many of these are only 20% vested.

Plan only has $150k in it.

Any participant with a balance under $25 will have their balance 'eaten up' by the plan admin's processing fee.

The plan sponsor never requested that the provider involuntarily cash out the small balances over time so the participant count has grown to 122. Yes, 122.

Should someone whose balance will be eaten up by processing fee really be considered a participant?

[rcline46]

It is my belief that ALL documents since EGTRRA have a FORCE out (unless the sponsor choose -0-) of small balances. You may have a failure to follow the document in this case.

Of course if no payout at all before some age like early or normal retirement you can accumulate people with small balances. We have two of those plans, and they won't change. And they do have to have an audit. However I would assume that is the exception and that most plans have the force out rule.

[GMK]

While they have a balance in the Plan, Participants need to be counted as Participants, no?

It won't help this year, but for next year, it's time to start processing small balance distributions (and hope you can get to 99 again to go back to the small plan 5500).

[david rigby]

The original post did not say the participants have severed employment, but it appears posts 2 and 3 may have assumed terminated. Be sure to follow the plan document with respect to a distributable event.

[CLE401kGuy]

Theses participants have all severed employment - that assumption is true! thanks for the feedback