Missing Participant Due Over $5,000

Is there any way for the trustee of a 401(k) plan that is not terminating to legally roll over a large balance on behalf of a missing or unresponsive participant to an IRA?  

7 hours ago, mming said:

Is there any way for the trustee of a 401(k) plan that is not terminating to legally roll over a large balance on behalf of a missing or unresponsive participant to an IRA?  

What does your plan document say about missing participants?  Did you look?

If the plan is not discontinued, why should the administrator or trustee distribute the participant's account?

Doesn't the participant have a right to continue until the participant's required beginning date?

Your plan document will tell you how to handle lost participants.   The big thing any more is making sure you can document they are lost.  The DOL has taken this topic up.  You need to be able to document you did a search that meets their requirements before declare a person lost. 

Plan provisions can mandate distributions at retirement age.  If it does, and the person has reached normal retirement age, and the person is missing, the plan can force out the monies.

We’re all imagining possibilities for the situation mming described.  Mike Preston mentions one I didn’t ask in my questions.  I omitted the possibility that a plan might compel an involuntary distribution because a participant attained normal retirement age.

In the profit-sharing plans I’ve seen, the only real effect of an ERISA § 3(24) normal retirement age is making an account non-forfeitable if it wasn’t already.  Some plan documents recite an entitlement to a distribution at normal retirement age, but also provide that an absence of a claim is deemed an election to continue.

BenefitsLink mavens, has anyone seen an IRS-preapproved document that allows a plan sponsor to provide an involuntary distribution on or after normal retirement age but before the IRC § 401(a)(9) required beginning date?

This is more than an idle curiosity.  I have a client that has participant-friendly reasons for getting participants rolled out of the 401(k) plan before any § 401(a)(9) provision could apply.

The plan is using an FTW doc which doesn't address amounts >$5k regarding missing participants.  There is nothing prohibiting a terminated participant from keeping their VAB in the plan until their NRA.  However, over the years there has been quite a few missing participants accumulating to where they comprise about half of the 20 participants currently in the plan.  The concern is that the IRS may notice this on the 5500, triggering an audit.  Also, the trustee is aware that admin costs would decrease by paying out as many terms as possible.

 I have seen interpretations of 401(a)(31)(b) and 2550.404a where it's suggested that since those regs discuss safe harbor ROs for amts <$5k, it can be implied that ROs for >$5k, though they would be non-safe harbor, are permissible (if due diligence is used), and it has been established that the participant is missing.  Seems like a stretch to me, but I would hope there was a way to not obligate a plan to carry a balance for a missing participant, perhaps for decades, even after the trustee has tried many different ways of finding them.

BTW, none of the missing participants are near NRA.

Why would you think the IRS would audit a plan like that?  There are no red flags.  10 Actives.  20 Accounts.

1 hour ago, Peter Gulia said:

 

BenefitsLink mavens, has anyone seen an IRS-preapproved document that allows a plan sponsor to provide an involuntary distribution on or after normal retirement age but before the IRC § 401(a)(9) required beginning date?

 

This is more than an idle curiosity.  I have a client that has participant-friendly reasons for getting participants rolled out of the 401(k) plan before any § 401(a)(9) provision could apply.

Our VS document has an option that provides for an involuntary distribution to a terminated participant regardless of the value of the participant's account balance, upon attainment of Normal Retirement Age (or age 62, if later).  It's an ASC document. 

Kevin C, thank you.

If a participant's account is more than $5,000 and the participant has reached neither her required beginning date nor her normal retirement age, one doubts the plan provides an involuntary distribution.

Peter, the plan doesn't, and it doesn't sound like it's possible to have such a provision even if you wanted to.  I thought that may be the case, but I wanted to make sure there wasn't an out I was overlooking.  Thank you for your response - thanks everyone.

5 hours ago, mming said:

The plan is using an FTW doc which doesn't address amounts >$5k regarding missing participants.  There is nothing prohibiting a terminated participant from keeping their VAB in the plan until their NRA.  However, over the years there has been quite a few missing participants accumulating to where they comprise about half of the 20 participants currently in the plan.  The concern is that the IRS may notice this on the 5500, triggering an audit.  Also, the trustee is aware that admin costs would decrease by paying out as many terms as possible.

 I have seen interpretations of 401(a)(31)(b) and 2550.404a where it's suggested that since those regs discuss safe harbor ROs for amts <$5k, it can be implied that ROs for >$5k, though they would be non-safe harbor, are permissible (if due diligence is used), and it has been established that the participant is missing.  Seems like a stretch to me, but I would hope there was a way to not obligate a plan to carry a balance for a missing participant, perhaps for decades, even after the trustee has tried many different ways of finding them.

BTW, none of the missing participants are near NRA.

I am having a hard time believing the document is silent on the topic.  I would talk to your document provider.  Check the base document if it is a two part type of document. 

In all the decades I have been working in this field I can't remember a time the document didn't discuss this issue.  The most common provision is some kind of forfeiture of the benefits if the person is lost and you did a diligent search.  The DOL is now making a lot of noise about doing that but it is the most common provision. 

If you can get a pdf of the document I would search for words like "lost" "missing" and other words like that.  

We use the FTW volume submitter document that is in an AA and BPD format. Section 7.08 in the BPD outlines what needs to happen if there is a missing payee. You can also enlist the services of Penchecks or Millennium Trust or others is missing participant searches.