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Archived News Release — Caution: Information may be out of date.
EBSA News Release: [03/01/2004]
Contact Name: Gloria
Della
Phone Number: (202) 693-8664
Labor Department Proposes Rule to Preserve Retirement
Savings
WASHINGTON—The U.S. Department of Labor announced a proposed
rule that provides guidance on how employers and financial institutions can
implement the new requirement that retirement plan distributions between $1,000
and $5,000 be automatically rolled over into an individual retirement plan
unless the worker directs otherwise. By following the terms of the regulation,
employers will meet their fiduciary responsibility for choosing the IRA or
annuity provider and investment of the funds.
“Preservation of retirement savings when workers change jobs is key
to ensuring retirement security,” said Assistant Secretary of Labor Ann L.
Combs of the Employee Benefits Security Administration (EBSA). “The
proposed rule changes the landscape from one where workers cash out and spend
small distributions to one where savings accumulate over time and are available
when needed at retirement.”
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
requires that certain distributions of retirement plan benefits of $1,000 to
$5,000 be automatically rolled over into an individual retirement plan when a
separated worker fails to elect a distribution method. The proposed regulation
protects retirement plan fiduciaries from liability under the Employee
Retirement Income Security Act (ERISA) by providing a safe harbor in connection
with two aspects of the automatic rollover process – the selection of an
institution to provide the individual retirement plans and the selection of
investments for such plans.
In order to obtain relief under the safe harbor, plan fiduciaries must
satisfy certain conditions. Among others, these relate to the types of
institutions that are qualified to offer individual retirement plans, the
investment products in which funds can be invested, and the limitations on the
fees and expenses that may be assessed against the individual retirement plan
funds.
The department also is proposing a class exemption. The proposed
exemption would enable certain plan sponsors to use their own services and
products in connection with rollovers from their own retirement plan.
Public comments on the proposed regulation and class exemption are
scheduled to be published in the March 2, 2004 Federal Register.
Comments should be submitted by April 1, 2004 to the Office of Regulations and
Interpretations, Employee Benefits Security Administration, Room N-5669, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210,
Attn: Automatic Rollover Regulation. Electronic responses may be addressed to
e-ori@dol.gov and should be marked
“Automatic Rollover Regulation” on the subject line. Comments on the
proposed exemption should be addressed to the Office of Exemption
Determinations in Room N5649 at the address above or by Internet to
moffitt.betty@dol.gov.
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Archived News Release — Caution: Information may be out of date.
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