Page 252 - DCAC February 2024 Files

Amounts and Process

• The Code indicates employers may periodically review amounts and distribute accounts below the
established threshold. “Periodically” is ambiguous and could mean from time to time or as
frequently as annually, which is most common.

• Prior to 2024, the Code permitted plans to automatically distribute balances under $5,000.

• Account balances less than $1,000 may be distributed in a lump-sum payment directly to the
participant.

• Participants with account balances between $1,000 – $5,000 may be distributed to an IRA custodial
account.

• Effective 2024, the upper end of the limit was increased from $5,000 to $7,000 as part of SECURE
2.0 Act. Most providers, including Empower, have by default increased the amount to $7,000.

• The Plan may establish an arrangement with an IRA custodian to have balances automatically rolled
over if a participant does not comply with the request to distribute their balance.

• The plan sponsor must provide participants with 30 days notice prior to automatically distributing
or rolling over their account balance.

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