Mandatory cash-out provision limited to those under age 55 at termination of employment

Plan states that if a participant's vested balance is >$1,000 but <$5,000 and the term'd participant has not attained the later of age 55 or the NRA under the plan on the termination date, then the balance is cashed out and rolled to an IRA absent a contrary election. Mandatory cash-out doesn't apply to anyone else regardless of vested balance.

The plan utilizes a pre-approved plan document. Nothing in the adoption agreement or BPD (relius doc) speaks to applying an age criteria other than age 62 or NRA in the plan.  

Besides being an operational failure (failure to operate the plan according to its terms), are there NDT issues here?  Any other flies in the ointment you can see?

Any feedback is greatly appreciated.  

If the IRS-preapproved documents are insufficient to express the plan sponsor’s desired provision, is it feasible to do a plan amendment that would state the desired provision?

The 62 or NRA is statutory - but you say the plan uses 55, correct? I don't think there is anything wrong with that, but maybe I'd ask why they have it that way.

What is the operational failure of which you speak? Are they cashing out after age 55? Not at all?