Do you have a strong opinion about auto portability? Now’s the time to speak up.
The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) is asking the public to comment on a proposed exemption related to the consolidation of small 401ks that are commonly left behind when employees change jobs.
As it stands, the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) don’t allow sponsors or fiduciaries to use plan or employee assets to pay fees for moving a former worker’s retirement savings out of their former plan and into an IRA or new employer’s plan.
This often leads to missing or unresponsive participants, forced or elected cash-outs and, ultimately, retirees exiting the workforce with inadequate savings.
The DOL, however, has the authority “to grant exemptions that are protective of and in the interests of plan participants and IRA owners,” EBSA noted in its announcement Wednesday.
The proposed rule would temporarily excuse just one firm, Retirement Clearinghouse, from ERISA and IRC directives that currently discourage automatic rollovers.
The Charlotte, N.C.-based company’s proprietary auto portability program is intended to work like this:
“Employees would be told their 401k savings will be moved to tax-favored IRAs when they leave a job or if the plan is terminated, and that the employee’s savings in the IRA then would be automatically transferred to the 401k plan of the new employer when the employee finds a new job,” EBSA explained.
“The Department welcomes innovation in the area of retirement asset portability, and encourages additional proposals,” according to the announcement, “including any data or factors that it should consider as part of the exemption, including protective conditions for participants and beneficiaries.”
It will accept comments and requests for a hearing by mail, email or fax through December 22. More information is available on the DOL website.
Jessa Claeys is a writer, editor and graphic designer.
