Involuntary Cash-Out


DEFINITION of 'Involuntary Cash-Out'

Distributing the balance of a participant's retirement account under a qualified plan without the written consent of the participant, the participant's spouse or beneficiary.

BREAKING DOWN 'Involuntary Cash-Out'

Involuntary cash-out usually occurs if the participant's balance is no more than $5,000 and he or she is either no longer employed by the employer sponsoring the qualified plan, or has died. Effective Mar 28, 2005, a qualified plan must ensure either that cash-out balances between $1,000 and $5,000 are rolled to a Traditional IRA (by means of an automatic rollover), or that cash-outs will not occur if the participant's balance is more than $1,000.

  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Distribution

    1. When trading volume is higher than that of the previous day ...
  3. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  4. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  5. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  6. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
Related Articles
  1. Entrepreneurship

    Business Owners: Rules For Qualified Retirement Plans

    Business owners need to take note of how they handle qualified-plan distributions to former employees.
  2. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  3. Retirement

    Is Netflix Stock Suitable for Your IRA or Roth IRA?

    Learn about the risks of Netflix's business plan and long-term corporate strategy, and see if the stock's risk/reward profile warrants inclusion in an IRA.
  4. Retirement

    Pros and Cons of Deferred Compensation Plans

    Learn about the pros and cons of non-qualified deferred compensation (NQDC) plans, including the flexibility of non-ERISA plans and the potential for forfeiture.
  5. Retirement

    Is Caterpillar Stock Suitable for Your IRA or Roth IRA?

    Learn about Caterpillar's suitability for a retirement portfolio. Does CAT have long-term viability? Find out if CAT is better for a traditional IRA or Roth IRA.
  6. Financial Advisors

    How to Help Plan Sponsors Meet Fiduciary Duties

    Advising 401(k) plan sponsors is a great business model for financial advisors. Here's how advisors can help plan sponsors meet fiduciary obligations.
  7. Retirement

    4 Ways to Boost the Amount You Save for Retirement

    Retirement can easily last more than twenty years, which means you have to save a lot. Thankfully, there are ways to enhance the amount you put away.
  8. Retirement

    What Happens to a 401(k) After You Leave Your Job?

    Find out what happens to your 401(k) after you leave your job. Learn about your five primary options, including cashing out and rolling over to a new plan.
  9. Retirement

    How 401(k) Matching Works

    Find out how employer matching of your 401(k) contributions works, including how employer contributions are calculated and annual contribution limits.
  10. Retirement

    Is Berkshire Hathaway Stock Suitable for Your IRA or Roth IRA?

    Discover how Warren Buffett's Berkshire Hathaway is structured and if the company is appropriate for individual retirement accounts.
  1. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  2. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  3. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>
  4. Can a 401(k) be used for a house down payment?

    A 401(k) retirement plan can be tapped to raise a down payment for a house. You can either borrow money or make a withdrawal ... Read Full Answer >>
  5. How old do I have to be to make catch-up contributions?

    Most retirement plans such as 401(k), 403(b), individual retirement accounts (IRAs) and Roth IRAs allow for catch-up contributions ... Read Full Answer >>
  6. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center