apply distribution fees to very low balance twice ?

okay, so...apparently, about 5 years ago, a participant was automatically cashed out, and a check for $40 written to him.

that check has never been cashed and the plan is moving recordkeepers.

we are assuming at the time, that distribution fees were already applied to his account, but we would like to just forfeit this remaining uncashed balance as in applying a new round of fees.

Curious of any thoughts on this?

I think the RK should have done something about an uncashed check before 5 years. WTH? They should send it to one of the force out IRA places and waive any of their fees since they got the float for 5 years. 

Five years ago (near a coronavirus outbreak) United States mail was unreliable. Also, thefts and other frauds were extraordinary.

Before deciding what to do next, a plan’s administrator might consider whether to investigate some circumstances surrounding the uncollected payment. Some might investigate a little even if the expense is disproportionate to the distribution’s amount.

On 5/17/2025 at 7:58 AM, Peter Gulia said:

Also, thefts and other frauds were extraordinary.

Still are.  

Interrogation from the Language Police:

“Also, thefts and other frauds were extraordinary.”

Does this mean that the amount of thefts and other frauds was extraordinary, i.e. rampant? Or does it mean that thefts and other frauds were uncommon, and therefore extraordinary?

QDROphile, thank you for helping me think about diction and grammar.

I meant that in 2020, after coronavirus, the numbers of thefts and other frauds were beyond what had been ordinary.

16 hours ago, Peter Gulia said:

QDROphile, thank you for helping me think about diction and grammar.

I meant that in 2020, after coronavirus, the numbers of thefts and other frauds were beyond what had been ordinary.

Peter, but the issue isn't that the money went missing. The issue is the check never got cashed. The RK shouldn't have accounted for an uncashed check for 5 years. They would have cleaned it up and forced it to an IRA long ago.

I imagined some possibility that the distributee didn’t receive the check that paid the involuntary distribution.

Further, the distributee might not have received (or might not have read) a notice that the unrequested distribution would be paid.

Following TPApril’s description, it seems the involuntary distribution was not destined for a default rollover to an IRA.

The plan’s administrator might know only that a payment was not collected, but might not know why it was not collected.

We’re commenting without having read: the plan’s governing documents, the trust agreement or declaration (if any), a group annuity contract (if any), a custodian’s agreement (if any), the recordkeeper’s service agreement, and an agreement with a default IRA provider (if any).

While a plan’s administrator might wish a recordkeeper’s services would include some about uncollected payments, we don’t know what this recordkeeper was obligated (or even permitted) to do.

3 hours ago, Bill Presson said:

The RK shouldn't have accounted for an uncashed check for 5 years. They would have cleaned it up and forced it to an IRA long ago.

ahhh to be so idealistic.....

7 hours ago, TPApril said:

ahhh to be so idealistic.....

I said “would have” and meant “should have.”  
 

It’s a shame they didn’t fix it. 

The participant ostensibly paid tax on the $40 (I'm guessing there was no withholding <$200).

Are you suggesting the r/k forfeit the funds the participant paid taxes on?

This might be one of the very, very rare times I suggest using FAB 2025-01 and transfer the balance to a state unclaimed property fund.

It's not a perfect solution, but the plan pretty much has exhausted available reasonable approaches and the individual may still be able to recoup the amount.

3 hours ago, BG5150 said:

The participant ostensibly paid tax on the $40 (I'm guessing there was no withholding <$200).

Are you suggesting the r/k forfeit the funds the participant paid taxes on?

Ultimately we are eating our own fees on this and having them send it over to an IRA.