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TPAs

Plan Sponsors Like Automatic Rollovers

Once they understand the rules, plan sponsors prefer to take full advantage of the Automatic Rollover rules and rollover all forced cash-outs – even those under $1,000. Why? Because many, if not most, Missing Participants have benefits under $1,000. Plan sponsors want to distribute these accounts rather than keep them in their plans.

How often are you asked “Why are you still showing this person on the report? He hasn’t worked here for three years.”

You have to explain that the ex-employee did not return the distribution election forms, so the trustee did not process the distribution.

Or, since the amount was under $1,000, the trustee sent him a check which was never cashed.

If the plan had permitted Automatic Rollovers for all forced cash-outs of $5,000 or less, the Trustee could have rolled his account to an IRA.

We can help

Liberty Trust Company will accept rollovers of any size. We see the Automatic Rollover rules as a solution, not as a problem.

How Automatic Rollover can help your clients

Reduced Fiduciary Liability

Plan sponsors do not want to have fiduciary liability for employees who no longer work for them. An automatic rollover eliminates the plan sponsor’s fiduciary liability immediately.

Reduced Administration Burden

Plan sponsors no longer need to send Summary Annual Reports, SPDs, SMMs, blackout notices, etc. to these “missing participants”.

Reduced Administration Costs

Automatic Rollovers can reduce per participant fees. They can also reduce PBGC premiums in defined benefit plans. They may also help to reduce the participant count so that audit by an accountant can be avoided or eliminated.

More Favorable Fund Pricing

Fund providers often base their asset charges, at least in part, on the average account value. Rolling out missing participant accounts increases the average account value and can result in lower asset charges. This could be viewed as a necessary step in fulfilling FIDUCIARY RESPONSIBILITY.

Access to Forfeitures

Without a distribution to a terminated participant, the plan must wait five years to utilize forfeitures. Automatic rollovers allow the non-vested funds to be forfeited sooner.

Easier Plan Terminations

If a plan has missing participants when it terminates, the plan fiduciary must conduct searches to locate them. This can often delay final distribution of assets.

highlights of the Liberty Trust Company Automatic Rollover Program

  • Cost to the plan sponsor – $0.00
  • Low set up ($25)and annual fee ($25)for participant
  • No minimum balance
  • Complies with Safe Harbor provision of DOL regulations
  • Experienced staff to assist TPAs and plan sponsors