Automatic Rollover

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Automatic Rollover

The transfer of a small amount of funds from one IRA to another owned by the same person without the owner's authorization. Rollovers happen most often when an employee changes jobs and therefore IRA accounts. Automatic rollovers occur when there is a small amount of money (usually $1,000 to $5,000) left in the first account; a plan administrator is responsible for transferring the funds between accounts. Since 2005, automatic rollovers into a traditional IRA have been required in this situation. See also: Involuntary cash-out.
References in periodicals archive ?
"This sets a new standard of care for automatic rollovers," Williams says, adding that the scenario for participants is better than a force-out to an automatic individual retirement account [IRA].
New York, NY, September 02, 2016 --(PR.com)-- Terry Dunne, Managing Director - Automatic Rollovers, Millennium Trust Company to Speak at KC's Navigating the Pension Plan De-Risking: Significant Implications to Employers and Retirement Policy Live Webcast
Automatic Rollovers. Under Department of Labor regulations, plans subject to the direct rollover rules are required to provide that a cash-out distribution (see Q 336) in excess of $1,000, and less than $5,000, will automatically be transferred to an individual retirement plan unless the distributee affirmatively elects to have it transferred to another eligible retirement plan, or elects to receive it directly.
"Specifically, the department's regulations on automatic rollovers provide safe harbor relief in connection with cash outs of small account balances of terminated employees that are rolled over into an individual retirement account, which in turn is invested in a product designed to 'preserve principal and provide a reasonable rate of return, whether or not such return is guaranteed, consistent with liquidity.'"
The new edition addresses new IRS rules, the Department of Labor's regulations on automatic rollovers of involuntary cashouts, preexisting condition exclusions and the DOL safe harbor model Notice of Special Enrollment, and the Notice of Application for Extension of Unfounded Liability Amortization.
In the event participants cannot be located or fail to elect a method of distribution, the bulletin indicates that ERISA fiduciaries may follow a new safe harbor regulation governing automatic rollovers for guidance on distributing benefits.
28, 2004, the Department of Labor (DOL) issued final regulations (45) implementing a fiduciary safe harbor for automatic rollovers of mandatory cashouts from tax-qualified pension plans.
Disregard of Rollovers for $5,000 Cash-Out Purposes and Automatic Rollovers of Certain Involuntary Distributions
The RCH program portability services mentioned in the request involve automatic rollovers of mandatory distributions and account balances from terminated workers’ defined contribution (DC) plans into default individual retirement accounts (IRAs), and the subsequent automatic roll-in of funds in the default IRA to an individual account plan maintained by a new employer when the IRA owner changes jobs.
In September 2004, the Department of Labor issued final regulations that establish "safe harbor" rules for retirement plan fiduciaries who are involved with automatic rollovers of $1,000 or less as well as automatic rollovers of $1,000 to $5,000.
EBSA notes in its analysis that it has referred several questions about automatic rollovers to the Internal Revenue Service.
If this fails, DOL's direction is that plan sponsors must always consider using the automatic rollover process for assets belonging to missing participants.

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