VERIFIED SOLUTION i

MailStream Plus Are there parameter options for handling invalid ZIP Code pieces in MailStream Plus?

Product Affected: MailStream Plus
The first question may be why the piece being mailed would have an invalid ZIP?  Was it address-coded, etc?   But moving past that-

If the ZIP IN parameter has a Y in position 28, then MailStream Plus (MSP) validates that the full 5-digit ZIP of the record exists in the USPS data.  If position 28 has an N or is blank, then MSP will only check the first 3 digits.  
If desired, possibly having MSP only check the first 3 digits may make an invalid ZIP Code piece seem to be valid.  But this won't help if there is no ZIP Code at all, or if the first three digits are not valid.

Or, 
If the job has a ALG PS parameter with a Y in position 18, you can remove that parameter (or the Y), and then the invalid ZIP piece(s) will be ignored, and not included in the Presort or the Mail.dat files.  The Audit Trail report will indicate at the end "x Invalid" record(s)".  
The invalid-ignored ZIP records will (by default) just be written out at the end of the Output Name-Address file.  (Or at the end of each Entry Point/Batch if the job has multiple entry points and/or batches.)
** Note:  ALG PS parameter with a Y in position 18 is only valid for First-Class (excluding Priority Mail)  and Standard

Or, 
You can add an FILEDF MSSTOR parameter to the job, and that tells MSP to write out invalid ZIP Code records to the reject file.  Then they will not be included in the presort, nor the Mail.dat files, nor the Output Name-Address file.
UPDATED:  May 24, 2019