We are a TPA firm. Late last year we issued checks to plan participants whose company had gone out of business. We still have quite a number of uncashed checks where funds were paid to participanst & IRS withholding remitted. Rather than re-issue checks to participants we are looking at issuing stop payments & sending funds to an investment account. I don't believe we can set up IRA's since we've already issued a 1099-R for 2002 using code 1 & have sent 20% to IRS. Is anyone aware of situations where a TAXABLE account can be established without an individual participant signature? We reallly need to get these funds cleared as the financial institution holding them is now assesing monthly fees due to the remaining balance being below a set minimum. Any guidance here woule be appreciated.

How many do you have? What is the total $ amount? I know there are many critics of this out there...but can you stop payment and remit the remaining balances to IRS as withholding also? It wouldn't change the distribution code you used on the 1099-R, just the tax amount. It might be the cleanest way to close this out. You could also try the lost participant program at the IRS. I have had both good & bad luck with it. As you mentioned, though, that takes time.....

We know where these people are, they just haven't cashed their checks. The amounts vary from under $100 to over $3000. In the past we have done 100% withholding on smaller amounts but never on larger amounts (over $1000.00) Perhaps just sending these folks a letter threatening that we will send their funds ti IRS will get them to cash their checks! Thanks for your input.

How about a "threatening" letter that you are going to let the service charges apply to reduce the amount of distribution?

Pax,

Good thought - we'll add to our letter & see how quickly people respond. Thanks!