Automatic Rollover Program

While automatic enrollment has increased plan participation, it is also contributing to the growing percentage of separated accounts where participants have left money in a retirement plan after retiring or changing jobs. This is one factor driving the increasing need for plan sponsors to clean up their retirement plan account books.

DST's Automatic Rollover Program (ARP)

An automated tool for answering the mounting challenge of accumulated small balance accounts left behind.

As a result of the 2001 Economic Growth and Tax Relief Reconciliation Act (EGTRRA) and the 2004 Department of Labor (DOL) fiduciary safe harbor provisions, plan sponsors can execute automatic rollover (or involuntary rollover) programs to purge small balance accounts of terminated participants off their books and into a pre-selected IRA.

DST’s Automatic Rollover Program facilitates the process for plan sponsors, by offering:

  • A choice of six IRA options.
  • Electronic enrollment and paperless transaction processing.
  • Automatic IRA openings within 24 hours.
  • Plan sponsor enrollment, notification, and contractual processes.
  • Reconciled reports on fund activity.
  • Programs for defined benefit and defined contribution plans and pension de-risking events.
     

Benefits of Automatic Rollovers

Automatic rollovers can be an attractive way to reduce the administrative burden of transitioning small-balance plans. Implementing an automatic rollover program to establish safe harbor IRAs for missing or non-responsive participants provides plan fiduciaries and administrators with several benefits.

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Reduces Plan Expenses
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Potentially Eliminates Cost of an Audit
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Simplifies Participant Disclosures
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Eliminates Need to Track Former Employees
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Reduces Fiduciary Responsibility
Mandatory distributions help reduce plan expenses where recordkeepers charge fees on the number of accounts or the average account balance. Distribution small-balance accounts may reduce the participant count to fewer than 100, eliminating the expense of auditing for some plans. Automatic rollovers will reduce the number of participants to whom annual and quarterly disclosures need to be provided pursuant to Regulation Section 2550 404a-5. Automatic rollovers eliminate the need to keep track of former employees and also reduce the need for missing participant searches. Although exposure may be minimal, plan sponsors are required to act prudently and in the best interests of terminated participants. Mandatory distributions reduce fiduciary responsibility for former employees, and the fiduciaries benefit from the safe harbor that protects them.

 
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