If your plan has an automatic cash out and/or rollover provision, we will periodically review the plan and notify terminated participants who have a balance below the plan's cash-out threshold that they must take action on their retirement account. After the required wait period has passed, accounts for those participants who did not take action will be "swept", meaning they will be rolled over or cashed out according to the terms of your agreement with Sentinel.
Are mandatory distributions processed automatically or do I need to request them?
Mandatory distributions are processed automatically for many plans. In order to have these sweeps set up automatically, the following must all be true:
- Your plan document includes a provision for mandatory distributions
- The plan sponsor has signed a Blanket Authorization allowing Sentinel to automatically approve mandatory distributions
- For plans with an automatic rollover provision, the plan sponsor has signed a Rollover Agreement
How are participants notified that a mandatory distribution is required?
Participants will receive via postal mail the instructions for requesting a distribution online.
Which balances are considered when assessing whether an account meets the plan's mandatory distribution requirements?
Terminated participants will receive a distribution notification if their vested account balance less any outstanding loan balance is under the cash-out threshold defined by the plan. Rollover balances will or will not be included based on the provisions of your plan. No notification will be sent to participants whose balance is either less than $10 or less than the participant-paid distribution fee.
For plans with automated mandatory distributions, how often are plans reviewed and mandatory distribution letters issued?
How long after the initial notice goes out will the accounts be distributed?
After 60 days, an email notification will be sent to the distribution approver(s) associated with your plan with a list of the participants to be distributed, their termination dates, and their account balances. The distribution approver(s) will then have 7 days to review the records and reject any that should not be distributed. After 7 days, any outstanding mandatory distribution records will be automatically approved and distributed.
Is the plan sponsor required to approve each mandatory distribution?
No, you do not need to take any action to approve these requests. Unless you reject them, they will be automatically approved after 7 days. If a record is rejected because a termination date was submitted to Sentinel in error or because the participant was rehired, please contact your Plan Consultant to avoid subsequent mandatory distribution attempts.
Will mandatory distribution requests look different on the online distribution portal than requests initiated by plan participants?
Yes. The words "***MANDATORY DISTRIBUTION*** will be displayed at the top of the detailed distribution approval page on the distribution portal. In addition, mandatory distribution requests will not include the security quiz result or risk factor section since the request was not initiated by the participant.
After the initial mandatory distribution notice is sent, in what cases will the account not automatically be distributed at the end of the wait period?
- If the participant has logged into the distribution portal and has either completed a withdrawal or has a participant-directed request in progress.
- If the participant's balance is no longer below the cash-out threshold. For example, if a plan sweeps participants under $5,000 and a participant with a $4,800 balance is sent a letter but at the end of the wait period the balance is $5,200. In this case, the balance will not be distributed on the normal schedule but will continue to be monitored and distributed in the future if/when the balance drops below $5,000.
- If the participant is rehired during the wait period.
- If a distribution approver rejects a mandatory distribution record within the distribution portal.