In a 401(k)/PSP where deferral and rollovers are self-directed and ER contributions are Trustee directed, a terminated participant, whose vested benefit exceeds $5,000, elects not to take her distribution. The PSP account is valued annually. 1) Should the participant's vested benefit be automatically (plan administrator decides) "segregated" (which I interpret as placed in an interest bearing, insured account), or 2) should the participant be allowed to choose segregation vs. keeping benefit in employer investment account? There has never been an occasion where a participant has elected to postpone the distribution, so no accounts have ever been segregated. The document refers to segregated accounts in conjunction with the election of installment payments, and refers to segregated accounts in the allocation of earnings section. Comments on any aspect of this situation are appreciated.

I assume the plan document does not address it..?? I use Corbel's volume submitter doc's which speak to actually "segregating" a terminated participant's account. If the plan does not address it, then I guess the plan could let the terminated participant know that it will remain in the plan account and invested with other plan assets unless he/she takes a distribution. In short, if the participant wants to call the shots as to investment, then participant needs to take the distribution.