force out small balances to inherited IRAs?

[AlbanyConsultant]

Had a participant in RMD status die in 2023, and her account was to be split amongst her five daughter beneficiaries (which, ugh, but at least there was a valid beneficiary form!).  Three of the beneficiaries took their distribution in 2023.  Each share of the account is <$3K, and the plan has a $5,000 (I guess $7K now) forceout limit.

Presuming the remaining two don't elect to take their distribution in 2024, do we have any options?  Of course, we need an RMD based on the 12/31/23 balance, fine.  But can we force these amounts out of the plan?  The recordkeeper is ready to do so - they don't have any problem sending it to an IRA custodian.  Just not sure that I'm 100% comfortable going along with that.

Thanks!

[Peter Gulia]

Many plans provide an involuntary distribution on a participant’s small ($1,000, $5,000, or $7,000) balance.

But many plans do not provide an involuntary distribution on a beneficiary’s account, except as needed to meet a § 401(a)(9) required beginning date or minimum distribution, including a continued minimum distribution that began before the participant’s death.

For the situation you’re working on, what does the plan’s governing document provide?

This is not advice to anyone.

[AlbanyConsultant]

Exactly what you pointed out - the basic plan document says that a participant can be forced out... but doesn't say anything about a beneficiary getting treated the same.  However... this is the definition of "participant":

Quote

"Participant": Any Employee or former Employee for whom contributions are currently being made or for whom contributions have previously been made to the Plan and who has not received a distribution of his or her Accumulated Benefit under the Plan. A Beneficiary of any deceased Participant or any Alternate
Payee who has not received a distribution of his or her Accumulated Benefit under the Plan.

Hmmm.  Seems that I can treat the unpaid beneficiaries ass participants for this purpose... ?

[Peter Gulia]

A small-balance involuntary distribution usually relates to a participant’s severance-from-employment.

Even if a plan’s administrator interprets a plan’s governing document to treat a beneficiary as a participant (which I do not suggest), the administrator might doubt that an already-retired participant’s death is the beneficiary’s or the participant’s severance-from-employment.

Of the two remaining beneficiaries, won’t each’s required beginning date come soon enough?

[AlbanyConsultant]

If we have an option to force these balances out, then that's a better play than hoping to keep updated information on two never-employees.

The document provider said that we can treat "beneficiaries" as "participants" in this instance and force them out.  I guess that gives the plan sponsor something to stand on.

[FormsRstillmylife]

Where are you going to find a custodian that will provide an inherited IRA without an IRA owner signature?  Answer that before considering plan amendments to make this happen.

[Peter Gulia]

If the plan’s administrator seeks to use the IRA issuer regularly used for participants’ default rollovers, one might check whether the administrator’s or its recordkeeper’s contract with the IRA issuer obligates the issuer to accept a rollover of a beneficiary’s distribution.

Also, if some portion of what otherwise might be a single-sum distribution is a § 401(a)(9) minimum distribution, that portion is not an eligible rollover distribution.

[AlbanyConsultant]

21 hours ago, FormsRstillmylife said:

Where are you going to find a custodian that will provide an inherited IRA without an IRA owner signature?  Answer that before considering plan amendments to make this happen.

This is been the sticking point.