The Benefits of Mandatory Distributions
By Fred Reish and Bruce L. Ashton
Small 401(k) accounts of former employees increase plan costs, expand administrative obligations and extend fiduciary responsibilities. Plan sponsors should consider distributing these accounts under a well-defined process and regulatory safe harbors, and advisers can provide a valuable service to their clients by educating them on the benefits of mandatory distributions and helping them set up a routine process for sweeping out small accounts. By small accounts, we mean accounts of former employees with vested balances of $5,000 or less. (In determining whether an account falls under the $5,000 limit, amounts rolled over from a prior plan or IRA and earnings on those amounts are not considered. Thus, an account may have a larger total balance and still be considered a "small account" for purposes of this concepts discussed in this White Paper.)
The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.
Meet the Authors
