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Posted

Is there any way to force out small balances of active employees who have never contributed to the Plan?  We have a plan where a number of employees have balances <$1,000 resulting from a one-time profit sharing contribution. The employer would like to cover recordkeeping expenses for participants with less than $1000 as a perk to newer employees who are just starting to save in the plan, but want to exclude those with just profit sharing money. The recordkeeper is unable to do this systematically. Is there any creative way the employer can get these small balances out of the plan if these participants are still active employees? 

Posted

Look into a one time window for in-service withdrawals for people who have small balances??? It would seem most likely non-discriminatory. If they aren't putting money into the 4k portion they are the type who if given the chance to take the money and run.  Obviously not a force out but could get rid of most of the balances by their choice.  That is the only idea I can think of doing. 

Posted

If they are active and not yet the older of age 62 or the Plan's Normal Retirement Age I don't think there is a way to force them out.

As ESOP guy suggests you might be able to have an in-service window crafted to encourage people to voluntarily take a distribution.

Posted

That could get some people out. When was that PS made and are these people vested? If it has been a few years and that has been the only PS contribution, they may HAVE to be made fully vested upon the complete discontinuance of PS contributions.

Not knowing how RK expenses are determined, these people would still be participants just without balances, so included in testing, 5500 counts, etc.

Assuming there is already a match, maybe an additional year-end discretionary match for these (assume NHCEs) employees equal to the annual RK account charge? Plan document would need to allow - would be easy if RK account fee was fixed dollar per participant.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

Posted

Transfer those balance out of the participant-directed portion of the trust, and aggregate them all into a low-fee trustee-directed brokerage account.  Amend the document if necessary.  RK fees are almost always excessive when allocated to small balances, and any advisory fees are excessive compared to the annual account maintenance fee on the brokerage investment.

Posted

Fire them and then do an automatic cash-out.  Well, maybe that's not such a good idea.  A better idea would be to give them more profit-sharing contributions and get their balances up to something worthwhile.  By the way, I'm assuming the question was serious, but maybe not.   

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