Save time with our cheat sheets, fact sheets, checklists & books!

February 23, 2009

Involuntary cash-out

Your Guide



An involuntary distribution of a participant’s balance or $5,000 or less, under a qualified plan, 403(b) or 457(b) plan, which occurs when the participant is non-responsive to plan communications.

The plan administrator must provide written notification to the plan participants of its intent to distribute the amount , the tax-treatment of such distribution and rollover options.

Spousal consent is not required for a cash-out

Referring Cite

IRC § 411(a)(11) ;

IRC § 457(e)(9)(A); Treas. Reg. 1.411(a)-11(e),

IRS Notice 2005-05,

Fiduciary Responsibility Under ERISA Automatic Rollover Safe Harbor; Final Rule

Additional Helpful Information

  • Cash-out amounts between $1,000 and $5,000 must be rolled over to a traditional IRA
  • When determining the $5,000 balance, rollovers to the plan, and attributable interest can be disregarded
  • The following methods can be used to locate missing participants
    • Information from the IRS on Contacting Missing Participants or Beneficiaries
    • Social security administration’s Letter forwarding program

Keep Learning

Domestic abuse distribution

A domestic abuse distribution is one that is made to domestic abuse victim, during the 1-year period beginning on any date on which the individual

Eligible retirement plan

The term “eligible retirement plan”, means a retirement plan to which a rollover contribution can be made. These are: (i)an individual retirement account described in

Qualified See-Through Trust beneficiary

Definition A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Be among the first to know when

IRA Rules