Automatic Rollovers

[coleboy]

Hi,

Does every plan have to offer automatic IRA's for distributions between $1,000 and $5,000? That is, could a plan state that anyone with a balance under $5,000 distribute the balance in cash after a participant has been notified but has not responded after 30 days?

Thank you!

[Belgarath]

Well, the plan could set the cash out limit at $1,000, thereby eliminating the mandatory rollover problem. However, if the plan DOES have a cash out limit in excess of $1,000, then the amounts in excess of $1,000 are subject to the mandatory IRA rollover rules. So to answer your question, no. (if the amount is less than $1,000, then yes, it could be distributed in cash)

[coleboy]

If the cash limit is at $1,000 does that mean balances over that amount cannot be forced out? Sorry I am just coming back into doing tpa work and trying to catch-up with everything.

[Belgarath]

Right.

[John Feldt ERPA CPC QPA]

Is there another possible exception, depending on the terms of the plan, for forceouts of any size balance for terminees who are past NRA and had entered the plan more than 10 years ago? If they don't respond to make an election, I think the plan's terms could be written to require a force out.

[coleboy]

Unfortunately this plan isn't that old and neither are any of the terminated participants that tehy want to pay out.

[Belgarath]

Yeah, as John mentions, this is a standard provision in nearly every plan I've seen. I was just assuming you were talking about the "regular" cash out distributions. I shouldn't assume...