What is an Automatic Rollover and how does it affect my plan?
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) included a provision requiring qualified pension plans to automatically rollover mandatory distributions (distributions made without the participant’s consent) of more than $1,000 and less than or equal to $5,000 to an individual retirement account (IRA). Under the rules, the fiduciaries of the plan are required to establish an IRA to which mandatory distributions will be automatically rolled over. The Department of Labor has issued final regulations that establish a safe harbor under which a plan fiduciary will be deemed to have satisfied his or her fiduciary duties under ERISA when selecting the IRA’s and making initial investment elections for the IRA’s. In order to have safe harbor protection, plan fiduciaries must satisfy the following requirements: 1. The present value of the distribution may not exceed $5,000; 2. The distribution must be to an IRA; 3. The plan administrator must enter into a written agreement
