DoL Announces New Automatic Rollover Regulations

>The regulations will protect plan fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) by providing a safe harbor, according to the DoL announcement. This is in connection with the selection of an institution which provides IRAs, and the selection of investments. The new regulations will cover distributions between $1,000 and $5,000.

>In order to obtain relief under the safe harbor, plan fiduciaries must satisfy certain conditions which include the obligation to choose a plan provider which is qualified to offer IRAs, the obligation to utilize investment products designed to preserve principal, and the obligation to keep fees in check by selecting a plan whose fees are not above what the plan provider charges other IRA customers, according to the rule.

The DoL will also implement a class exemption that would enable certain plan sponsors to use their own services and products in connection with rollovers from their own retirement plan.

“Every little bit counts when talking about saving for retirement” said Ann Combs, Assistant Secretary of the Employee Benefits Security Administration (EBSA), in the press release. “Unfortunately, some workers change jobs and fail to tell their employers what to do with their retirement accounts.  This rule will ensure that those savings are preserved for retirement.”

The new regulations had been proposed in March, with the DoL asking for public comments (See DoL Releases EGTRRA IRA Rollover Rule ). The requirement was called for in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

>The final regulations are available at http://www.dol.gov/ebsa/regs/fedreg/final/2004021591.pdf .