Rev. Rul. 2000-36 - Direct Rollover to IRA as Default Distribution

[Guest EMC]

I understand the recent IRS revenue ruling (2000-36) that rules that a plan may use a direct rollover to an IRA as its default distribution where the participant's benefit is less than $5,000 and the participant has not elected to take cash or roll the benefit over into another qualified plan. Some comments I've read even indicate that the IRS prefers direct rollover to an IRA in the case of the accounts of missing participants in a defined contribution plan's termination.

As a practical matter, though, will a bank permit an IRA to be set up FBO a participant who hasn't personally signed up for the IRA her/himself? If the participant is "missing," why would a financial instituion want to take on an IRA with what has to be a small amount in it (less than $5,000) and cause itself the administrative burden?