Automatic Rollover IRAs
Employer Requirements
On September 28, 2004, the Department of Labor (DOL) issued final rules providing plan fiduciaries with a safe harbor for making decisions about default rollover IRA providers, as well as initial IRA investments, effective for mandatory distributions made on or after March 28, 2005.
The Fiduciary Safe Harbor provides guidelines under which the plan sponsor can implement the automatic rollover with the knowledge that his or her fiduciary responsibilities are being satisfied. The Safe Harbor has five conditions:
- The amount of the rollover does not exceed $5,000.
- The IRA is a Traditional IRA or Roth IRA and either a trust or custodial individual retirement account or an individual retirement annuity. If the IRA is a custodial account, the custodian must be a bank, an insured credit union, or other corporation subject to supervision by the Commissioner or Banking.
- There must be a written agreement between the fiduciary and the IRA Provider.
- The participants must have been furnished information about the plan's automatic rollover procedures in the Summary Plan Description.
- The selection of the IRA may not result in a prohibited transaction.