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.

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