Force out amount upon plan termination

Hi

Plan terminated 12/31/2023 with force out at $1,000 (i/o $5,000). No SECURE amendment was made to increase to $7,000.

I was not an issue as the participant with 1.5k balance was eager to get the monies but now not returning the distribution paperwork.

Can the plan be amended now to increase the force out to 5k so that this participant can get paid the lump sum?

Thanks

7 hours ago, Jakyasar said:

Can the plan be amended now to increase the force out to 5k so that this participant can get paid the lump sum?

Can?  The plan sponsor may wish to consider the expense of amending vs. a phone call to "remind" the participant whose court the ball is in.

Amendment is the only option as the participant is not responding so call is out.

So, can they?

Can't you just force them out to an IRA due to plan termination under Treas. Reg. §1.411(e) regardless of the existing threshold? 

Doesn't the plan-termination amendment that already was done provide that the final distribution that ends the plan is a single-sum distribution of the participant's, beneficiary's, or alternate payee's whole account?

Else, how would one end a plan?

Look in DOL FAB 2014-01 in the section titled Individual Retirement Plan Rollovers – Preferred Distribution Option, third paragraph.  The DOL says (and provides its supporting references) that if the plan is terminating and the participant is missing (read the plan cannot make the payment), then the plan should rollover the account balance to an IRA. 

You may wish to speak with some of the companies that specialize in setting up this type of account.

On a separate note, it is possible to amend a plan after the termination amendment has been adopted.  In this case, amending the plan should not be required unless the plan document, basic plan document, and termination amendment are silent on the issue and you want to rely on something more than the FAB.

Thank you all

Is this a DB plan, or other plan subject to QJSA? If so, does the plan exempt distributions between $1,000-$7,000 from the QJSA requirements? If it does, then I agree with the other commenters that you can go ahead and distribute the single sum upon plan termination.

If it does not, then you have to make the distribution in a form that preserves the QJSA rights. This probably means buying an annuity contract, or transferring the benefits to the PBGC's missing participants program. 

Optional forms of benefit with respect to distributions less than $7,000 are not a protected benefit under 411(d)(6), so the annuity options could be eliminated without disqualifying the plan. Once the annuity option is eliminated, you could distribute the single sum.

However, if the plan is covered by the PBGC, you may not amend the plan to eliminate a form of benefit after termination, regardless of whether it would be ok under 411(d)(6).

On 8/5/2024 at 2:27 PM, Paul I said:

Look in DOL FAB 2014-01 in the section titled Individual Retirement Plan Rollovers – Preferred Distribution Option, third paragraph.  The DOL says (and provides its supporting references) that if the plan is terminating and the participant is missing (read the plan cannot make the payment), then the plan should rollover the account balance to an IRA. 

You may wish to speak with some of the companies that specialize in setting up this type of account.

On a separate note, it is possible to amend a plan after the termination amendment has been adopted.  In this case, amending the plan should not be required unless the plan document, basic plan document, and termination amendment are silent on the issue and you want to rely on something more than the FAB.

Paul I, that is out of date. The PBGC does not allow for rollovers to an IRA for non-responsive participants. The plan would need to use the PBGC Missing Participant Program.