I have a potential client who has numerous former employees with small balances in the 401(k) plan. Generally, the average balance is under $100. Attempts to contact these participants have meet with some success. What is left are the really "lost" participants. How much effort and expense is the company expected to expend to locate these people for the small amounts involved? The balances are costing the company considerable administration expenses. Is it possible to:

1) Forfeit the balances and handle the forfeitures as provided for in the document? If a participant reappears the company would simplely cut him or her a check for the forfeited balance plus earnings. What are the risks of this method?

2) Some consultants have suggested a 100% withholding. I never heard of this. Has anyone used it?

3) Any other ideas?

Thanks.

There are (at least) several threads on this point. You should look at them.

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This problem has become so rampant that we have worked w/ a mutual fund family to provide an IRA rollover product. The plan sponsor simply directs us to transfer all involuntary distributions to an IRA rollover in Participants' name w/ the mutual fund as custodian. The mutual fund then has the problem. Still have the problem for participants w/ balances over $5,000, but there are few of those.

what mutual fund company? do you have a contact? do they have a minimum? ($500/$1000) do they have a policy on how to deposit/invest the money?

thanks!