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Encourage Retirees to Take a Lump Sum Distribution So As to Lower Participant Count to Fewer Than 100?
BenefitsLink Message BoardsLink to more items from this source
Oct. 8, 2021

"A 401(k) plan for the first time has over 100 participants and unfortunately must meet the plan audit requirements. There are over 50 retirees that have between $5000 and $10,000 in their account and if only a few of them withdraw their monies the plan would have less than 100 participants. The plan sponsor would like to force out or encourage these retirees to take a lump sum. Are there any options available?

It seems that the plan sponsor can contact these participants and remind them that they can take a lump sum or rollover to an IRA. I'm concerned that if the plan sponsor offers a cash or other incentive to take a lump and the retiree accepts it could be deemed self dealing with plan assets. Further, if the employer recommends a lump sum or a specific rollover it could be deemed fiduciary investment advice. Any suggestions?"

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