For many small plan sponsors, dealing with former employees who maintain account balances can be a major issue. These folks are naturely not as engaged in the day to day communications that extend to current employees. Many either don’t read mail or email from their prior employer or they have moved and those addresses no longer apply.
When automatic distributions occur for those former employees under 5K (auto rollover) or under 1K (cashed out), sometimes the checks go uncashed. SPARK Institute conducted a member survey this past year that covered ten providers who distributed four million checks in 2017. Of those, 185,500 went uncashed with a value of $47 million dollars.
The IRS has chimed in with guidance in revenue ruling 2019-19: https://www.irs.gov/pub/irs-drop/rr-19-19.pdf
This addresses how the taxation issues are to be handled but what about a small plan sponsor that is slowly approaching large plan filer status? These types of issues can multiply for growing businesses and a savvy retirement plan advisor can assist with creative solutions. #401k #403b #QPRetirement