Page 250 - DCAC February 2024 Files

Background

• The Internal Revenue Code (the “Code”) permits eligible employer sponsored retirement plans to
periodically force out di minimis (small balance) terminated participant accounts for the purpose of
reducing administrative costs and burdens.

– Plan administration and recordkeeping fees are often priced based upon the number of active
and inactive participants and/or average account balance.

– The di minimis accounts create lower average account balances, which may result in increased
administrative costs.

– The Plan is required to provide certain regulatory disclosures and notices to participants until
they take a full distribution from the plan, and delivery of these notices can be become more
costly over time, as the participant changes addresses, etc.

• Eligible plans include the County of San Mateo’s 457(b) Deferred Compensation Plans and 401(a)
Money Purchase Plan.

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