--- title: Three Steps to Getting Off the Uncashed Distribution Check Treadmill description: If you’re a defined contribution plan sponsor struggling with uncashed distribution checks, it can feel you’re on a never-ending treadmill. However, there are effective strategies that can greatly reduce the time, cost and risks associated with uncashed checks. Writing in the RCH Consolidation Corner blog, Tom Hawkins outlines three key steps to getting off the treadmill, including 1) a proactive program of locating missing participants, 2) eliminating the automatic cashout of sub-$1,000 balances and 2) utilizing safe harbor IRAs to resolve stale-dated checks. image: https://blog.rch1.com/hubfs/The%20Uncashed%20Check%20Treadmill.jpg --- [![Retirement Clearinghouse Logo](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/logo.png?width=1000&height=648&name=logo.png "Retirement Clearinghouse Logo")](https://rch1.com/) [Privacy Policy](https://securities.rch1.com/common/PrivacyStatement.pdf) [Sponsors/Service Providers](https://rch1.com/plan-sponsors) [Individuals](https://rch1.com/individuals) [Login](https://rch1.com/#) - [Home](https://rch1.com/home-page) - [Individuals](https://rch1.com/individuals) - [Individuals Home](https://rch1.com/individuals/individuals-home) - [Who is RCH?](https://rch1.com/individuals/who-is-rch) - 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By combining a proactive program of [locating missing participants](https://rch1.com/missing-participants), eliminating the [automatic cashout of sub-$1,000 balances](https://www.benefitnews.com/advisers/opinion/automatic-cash-outs-undermine-efforts-to-enhance-financial-wellness) and utilizing safe harbor IRAs for stale-dated checks, your uncashed distribution check problem can become much more manageable. **The Importance of Dealing with Uncashed Distribution Checks** To fully understand the importance of dealing with uncashed distribution checks, consider the perspective of the [Department of Labor (DOL)](https://dol.gov/), whose [Employee Benefits Security Administration (EBSA)](https://www.dol.gov/agencies/ebsa) unit enforces the Employee Retirement Income Security Act (ERISA). To the DOL, large numbers of uncashed checks are a positive indication that employees are not receiving the benefits they are owed, which can be construed as a breach of fiduciary duty under ERISA. **Three Steps to Getting Off the Treadmill** Here are three steps you can take to manage your uncashed distribution check problem. Step 1. Stop Automatically Cashing Out Sub-$1,000 Distributions One of the biggest unforced errors committed by plan sponsors is automatically cashing out terminated participant balances below $1,000. This practice typically produces an avalanche of uncashed checks, but it doesn’t have to be that way. It’s much better practice to roll over these balances via an [automatic rollover](https://rch1.com/automatic-rollover) process, which applies to all balances below $7,000, including balances below $1,000. Be sure to modify your plan provisions, and if your current automatic rollover IRA provider does not accept balances less than $1,000, then [find one who does](https://info.rch1.com/checklist-for-selecting-aro-svc-providers). If you are concerned with the smallest balances being depleted by safe harbor IRA fees, sign up for [auto portability](https://psn1.com/plan-sponsors/auto-portability-and-psn), as delivered by the [Portability Services Network (PSN)](https://psn1.com/). Balances under $50 move through PSN’s auto portability network at no charge. Step 2. Level Up Your Missing Participants Game To get out in front of your uncashed check problem, taking proactive steps to address the problem of missing participants is paramount. Being proactive means conducting broader participant search efforts than simply running down participants who present with uncashed checks. It means conducting searches for participants with stale addresses, returned mail, and those who have approaching RMDs. Keep in mind that, at any given time, [11.3% of plan participants are likely to have a stale address](https://rch1.com/plan-sponsors/addressing-the-problem-of-missing-participants/the-magnitude-of-the-missing-participant-problem) – so the frequent use of [low-cost electronic, or e-searches](https://info.rch1.com/missing-participant-esearch-study) can keep a lid on this number and minimize mis-directed checks. When attempting to resolve uncashed checks via missing participant searches, the search effort and cost should be commensurate with the uncashed check’s balance. For all uncashed check balances, we suggest that an initial e-Search be performed, since an e-Search is typically highly effective and low-cost. For larger balances (e.g., greater than $1,000), follow-on, [more intensive searches](https://rch1.com/blog/dialing-up-the-intensity-of-missing-participant-searches) can be conducted where an initial e-Search is unproductive. Step 3. Resolve Uncashed Checks with a Safe Harbor IRA Provider After undertaking more intensive search efforts, for those uncashed distribution checks that remain unresolved – despite diligent search efforts – we recommend that these balances be moved to a safe harbor IRA, where the third-party safe harbor IRA provider will continue diligent search efforts in order to reunite the participant with their uncashed balances. **Creating Breathing Space** The reality is, there will always be some level of uncashed distribution checks – at least for as long as retirement plans issue and mail physical checks. However, you can take decisive measures to proactively manage your uncashed check problem and by so doing, you will minimize the time, cost and hassle devoted to resolving them. 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