Force-out question

Plan calls for mandatory distributions under $5,000.  It says it will be done without participant consent.

Do they have to send out distribution forms to those they want to force out first? 

If so, what is the cite?

47 minutes ago, BG5150 said:

Plan calls for mandatory distributions under $5,000.  It says it will be done without participant consent.

Do they have to send out distribution forms to those they want to force out first? 

If so, what is the cite?

https://www.irs.gov/pub/irs-drop/n-05-05.pdf

Looks like you have to at least give the 402(f) Notice.

But, it says the PA won't fail the requirement if the Notice comes back undeliverable. And it seems like the force out can happen.

Isn't that at odds with the lost participant rules that say you have to try other means to locate them?  Or is that just for the folks over $5,000?

40 minutes ago, BG5150 said:

Looks like you have to at least give the 402(f) Notice.

But, it says the PA won't fail the requirement if the Notice comes back undeliverable. And it seems like the force out can happen.

Isn't that at odds with the lost participant rules that say you have to try other means to locate them?  Or is that just for the folks over $5,000?

 

Well you can't force out participants with more than $5,000 unless it's a plan termination.

Y'know, I'm not certain I quite agree with that on a blanket basis. (But I agree in the apparent context of BG's question.) I'll grant you that MOST plans are written that way, but I believe a plan can be written such that if you have reached NRA, a distribution can be forced. From memory, 411(a)(?11??)  but I'd have to look. Our plans allow postponement of distribution.

31 minutes ago, Belgarath said:

Y'know, I'm not certain I quite agree with that on a blanket basis. (But I agree in the apparent context of BG's question.) I'll grant you that MOST plans are written that way, but I believe a plan can be written such that if you have reached NRA, a distribution can be forced. From memory, 411(a)(?11??)  but I'd have to look. Our plans allow postponement of distribution.

That would be interesting. Would practically never have to deal with RMDs if that was the case.

3 hours ago, BG5150 said:

Plan calls for mandatory distributions under $5,000.  It says it will be done without participant consent.

Do they have to send out distribution forms to those they want to force out first? 

If so, what is the cite?

1.402(c)-2 q&a 1(b)(1).  The plan is required to provide the option to elect a rollover. How do you do that if you don't send out distribution forms?

24 minutes ago, Kevin C said:

1.402(c)-2 q&a 1(b)(1).  The plan is required to provide the option to elect a rollover. How do you do that if you don't send out distribution forms?

Agreed.  However, if the distribution is < $200 (including any eligible rollover distributions made previously during the tax year), then one doesn't have to offer a rollover election or obtain consent, so the distribution really can be made without sending anything to the participant first.  Treas. Reg. Section 1.401(a)-31-1, Q&A-11.

59 minutes ago, Belgarath said:

Y'know, I'm not certain I quite agree with that on a blanket basis. (But I agree in the apparent context of BG's question.) I'll grant you that MOST plans are written that way, but I believe a plan can be written such that if you have reached NRA, a distribution can be forced. From memory, 411(a)(?11??)  but I'd have to look. Our plans allow postponement of distribution.

Treas. Reg. 1.411(a)-11 is what you are recalling.  If the plan document so provides, no consent needed for distributions made after the later of age 62 or normal retirement age.  It's been a long time since I've seen a plan designed that way.