U.S. Department of Labor Announces Proposal Related to Retirement Asset Auto Portability
WASHINGTON, DC – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today invited public comment on a proposed exemption related to the consolidation of small retirement savings accounts in 401(k) plans and IRAs when workers change jobs. The Department welcomes innovation in the area of retirement asset portability, and encourages additional proposals.
Frequently, employees leaving their current place of employment with small account balances in the company's 401(k) plan often either take a distribution of their retirement savings or move the account into an IRA. The same outcome frequently occurs with small retirement accounts when a company terminates its 401(k) plan.
An auto portability program seeks to improve asset allocations by consolidating small retirement savings accounts, eliminate duplicative fees for small retirement savings accounts, and reduce leakage of retirement savings from the tax-deferred retirement saving system. Employees would be told their 401(k) 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 401(k) plan of the new employer when the employee finds a new job.
The Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 prohibits a plan or IRA fiduciary from using its discretion to cause the plan or IRA to pay the fiduciary a fee. The Department has the authority, however, to grant exemptions that are protective of and in the interests of plan participants and IRA owners. The Department looks forward to receiving input from the public, including any data or factors that it should consider as part of the exemption, including protective conditions for participants and beneficiaries.
The proposed exemption gives the public an opportunity to present comments. All written comments and requests for a hearing should be sent to EBSA's Office of Exemption Determinations, U.S. Department of Labor, 200 Constitution Avenue, NW, Suite 400, Washington, D.C., 20210. Attention: Application No. D-11938. Interested persons are also invited to submit comments and/or hearing requests to EBSA via e-mail or FAX. Any such comments or requests should be sent either by e-mail to: firstname.lastname@example.org, or by FAX to (202) 693-8474 within 45 days. The application for exemption and the comments received will be available for public inspection in EBSA's Public Documents Room, U.S. Department of Labor, Room N-1515, 200 Constitution Avenue, NW, Washington, D.C., 20210.