Death distribution - strange situation

[Belgarath]

Some details are sketchy, but as far as I'm able to determine at this point...

A participant terminated employment in early 2021. Left funds in the plan. Less than $5,000. There should have been a mandatory forceout in 2022 when the 2021 valuation was done, but for reasons unknown, it wasn't. When the 2022 valuation was done, (in 2023) this was caught, and a mandatory IRS rollover was processed in the fall of 2023.

Unknown to everyone, (apparently) the participant had died in the summer of 2022! Just to make it more interesting, no named beneficiary, and minor children involved, but that's a separate issue.

I'm really not sure what the ramifications are here, and it is a small amount of money, so I'm sure the Plan Administrator is willing to take a little "risk" if necessary, to clean this up without excessive time and effort.

If the vendor is willing to reestablish this as a plan account, (they are being questioned now) then it should be simple, other than correcting the 1099 (which may or may not have been issued yet - I don't know) - the death distribution will simply be processed according to plan provisions.

Any thoughts on this? I've never encountered this situation...

Thanks.

[Peter Gulia]

If the plan's administrator in fall 2023 did not know that the participant's death had happened, how does the plan's administrator know it now?

And has the plan's administrator received a claim from anyone?

 

[Belgarath]

Interesting that you should ask. As I find out more details, it appears that the plan's administrator DID know, but things got delayed and many signals crossed due to the paperwork received from the legal guardian and the scope of the guardianship, etc., etc., etc... - which STILL apparently hasn't been settled. The ball has apparently been dropped by various parties at various times, probably because the amount of money is so small - or perhaps for other reasons.

So the forceout was processed in error. 

[Bird]

If no one is hurt, that is, the minor children get the money from the IRA someway/somehow, does it make sense to ignore the error and let it play out?

[Belgarath]

Thanks. It might. I'm first looking to see if there is a simple "clean" fix - likely to depend upon what the custodian will or won't do, and how they will do it. That's being investigated currently. Follow the bouncing ball...