Default IRA Rollovers

[Guest Tom:]

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

[Jim Norman]

1.411(a)-11(e)(1)

[mbozek]

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

Why would you wan to do that since the funds will escheat to the state after a period of 3-5 years or less if not claimed which is the usual case since most missing participants never return to collect their funds. Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants?

[K2retire]

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

Why would you wan to do that since the funds will escheat to the state after a period of 3-5 years or less if not claimed which is the usual case since most missing participants never return to collect their funds. Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants?

There's that pesky rule about following the terms of the document. If the document says it goes to a default IRA rollover what choice do you have?

[mbozek]

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

Why would you wan to do that since the funds will escheat to the state after a period of 3-5 years or less if not claimed which is the usual case since most missing participants never return to collect their funds. Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants?

There's that pesky rule about following the terms of the document. If the document says it goes to a default IRA rollover what choice do you have?

Amend it. If it cant be amended then its a waste of plan assets to escheat the funds to the state.

[AlbanyConsultant]

Sorry for the zombie-thread, but...

Are the automatic rollovers at plan termination allowed even if the plan doesn't allow them normally? The language in 1.411(a)-11(e)(1) seems to indicate so... thanks.

[Spencer]

... Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants?

If we do forfeit, is there any requirement to record the liability of the forfeited accounts?