Forfeitures of De Minimus Balances (Posted August 22, 2002) Technical Tip 79: The following question and answer were from the IRS Q&A Session at the 2000 ASPPA Annual Conference: Can a 401(k) plan be amended to forfeit residual balances of under $20 for participants who have been paid out because of separation from service; subsequent to these distributions dividends posted resulting in de minimis balances? Response: No. Comment by the RLR&C ERISA attorneys: Even though the balances are small, they belong to the participants and cannot be forfeited simply because of the amount involved. As a practical matter, they may present a dilemma to plans because the recordkeeper/administrator may charge $25 or more for preparing the distribution check. (In cases where the costs for distributions are charged to the participants' distribution checks--the propriety of which continues to be an open question--the employer may have to pay part of that amount.) On the other hand, many recordkeepers assess an annual per-participant charge and/or determine the charges to a plan based on average account balances--and small undistributed accounts could result in charges under either of those scenarios. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.