Automatic Rollovers

[FJR]

I appologize if this has been asked before. Regarding the Automatic Rollover Regulations, an arrangement has to be worked out by each QP with an IRA vendor who is willing to accept th Automatic Rollover.

Anyone have a list of vendors doing this? What are other people out there doing?

Thanks.

[Guest smstls]

I've only seen four:

WealthMSI

Telephone: 201.651.0736

www.wealthmsi.com

Rollover Systems

Telephone: 704.295.1234, extension 223

http://www.rolloversystems.com/solutions/employers/

eTrade

Ameritrade Corporate Services

Telephone: 480.325.5133

www.ameritrade.com

[Guest planman]

We have decided to reduce our cashout limit instead of automatic rollovers. There are too many issues to contend with and we don't want to monitor another written agreement with another vendor. I received an unsolicited letter from a vendor you can also try. Contact James Boyd; Centier Bank; Indiana; 219-922-2410 x311.

[Archimage]

I believe PenChecks is another company that is doing them.

[Guest BJ]

As I understand, both Ameritrade and E*Trade offer the automatic rollover through Wealth Management Systems' Rollover Solutions Network. Conversations with a couple of the other internet providers indicate that they require an initial set up fee for their services which includes the IRA provider agreement. These initial set up costs (ranging from $250 + $100 per rollover to $995) appear to be greater than permitted to be charged to the rollover accounts by the DOL regulations. It is unlikely that a smaller employer would be willing to pay the set up fees. Is anyone aware of an IRA provider offering the automatic rollovers without requiring an initial set up fee? What if the mandatory cash out provision is removed or lowered to $1000 after March 28, 2005? Would this be acceptable and the employer would also be required to adopt the IRS model amendment in the interim?

[austin3515]

If you remove the provision, or decrease the limit to $1,000, you need not worry about this stuff. Of course you will need to worry about growing participant counts and admin fees, potential audit requirements, etc.

NEvertheless, my understanding is that at least in the short-term, many sponsors are taking this route.

[Guest P A Weick]

I thought the DOL rules only allowed charging set up fees which are the same as the set up fees that you charge to IRAs that are not established through these force out provisions. Do these vendors charge that much to establish an IRA account for anyone doing, say, a direct roll over from a qualified plan?

[Guest BJ]

Generally no. As I understand, the set up fees are for also providing the model plan amendment, the written agreement with the IRA provider, distribution materials to the participant and arranging the rollover to the IRA account through an alliance with a financial institution. This would generally be a one time set up fee for a plan sponsor plus an additional lower set up fee per each account established. At least 2 of the companies also offer full service distribution processing, but it would seem that the DOL regulation would not permit the initial plan sponsor set up fees to be charged to the initial rollover account. I do not know what set up fees if any are charged by Wealth Management Systems (WMSI) Rollover Solutions Network.

[mbozek]

Austin: Plans can charge admin fees to terminated participants to eliminate cost of maintaining accounts. Dont see any reason for plan sponsor to pay fees to set up automatic rollover provison.

[austin3515]

I agree whole heartedly (absent a close call on an audit requirement).

I think that the initial set-up fees that were discussed above were those of setting up the arranement for all future rollovers, i.e., a cost that will benefit participants for years to come. That would be difficult to charge to participants. How much would you charge? If the custodian has a "per account" set-up fee, than clearly that could be paid from the former participant's account balance.

[Guest mfb]

I have contacted Ameritrade, Etrade, Wealth Management Systems and Rollover systems regarding their automatic rollover products, and here is what I found out:

Etrade has an exclusive deal with Wealth Management Systems to be the IRA vendor for automatic rollovers that are made through Wealth Management Systems. Wealth Management System provides coordination of the IRA rollover process and provides the agreement to be signed by the plan administrator and the IRA provider (Etrade). I believe that using Wealth Management Systems requires a set up fee, but Etrade also charges a small annual fee for maintaining the IRA ($25 per year unless the participant agrees to receive all notices electronically).

Rollover Systems is not an IRA vendor, but another company, like Wealth Management Systems, that is willing, for a price, to faciliate the rollover procedure. I was told that they are willing to be as involved or uninvolved as the plan sponsor wants. To participate just in their automatic rollover solution, the initial, one time fee for the plan sponsor is $995. However, if you enroll in their "employer network" for a one time fee ranging from $1,000 to $7,500 (depending on number of participants), then the automatic rollvoer service is included. That company currently has 3 IRA vendors they are working with to provide automatic rollovers.

Finally there is Ameritrade. This is the best one in my opinion. They have a nice and simple agreement for plan sponsors to sign to provide automatic rollovers. There is no fee to the plan sponsor for doing this. There is also no set up fee for the IRA. The only fees and expenses are those that are charged to all IRA accounts by Ameritrade. If all you want is an IRA vendor willing to take automatic rollovers, then this is great. I was told that Ameritrade was hoping that by offering this service, they might be able to obtain good will, and possible other rollovers from plans, other than just the automatic rollovers.

I hope this is somewhat helpful.

[Guest lester456]

We have worked with Wealth Management Systems for the Automatic Rollovers. There is no fee whatsoever to the Plan Sponsor.