 NEWSLETTERS Volume 3, Issue 2 .................... June 2002 Automatic Rollover of Cash Out Distributions The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 makes direct rollovers to IRAs the default option when plan sponsors make involuntary distributions of vested account balances greater than $1,000. Currently, plan sponsors can make involuntary distributions payable directly to the participant for participants whose vested account balance does not exceed $5,000. Plan sponsors should first provide terminated participants the necessary distribution forms and special tax notice. If the terminated participants do not complete and return the distribution forms within 30 days, the plan sponsor may make an involuntary distribution of that participant’s account. Under the new rules in EGTRRA, plan sponsors will no longer be able to make involuntary distributions payable directly to the participant for accounts greater than $1,000. Plan sponsors will have to select a designated IRA and transfer the terminated participant’s account balance into the designated IRA. These provisions apply to distributions made after the Secretary of Labor issues final regulations as required in the tax act. Until these final regulations are issued, we recommend that plan sponsors aggressively pay-out terminated participants whose vested account balances are less than $5,000. If you need distribution forms and special tax notices, or if you have any questions, contact Administrative Retirement Services, Inc. ©2002 Administrative Retirement Services, Inc.
© Administrative Retirement Services, Inc. 2002 Published by Administrative Retirement Services, Inc., Copyright 2002 by Administrative Retirement Services, Inc. Reproduction in whole or in part is prohibited except by written permission. All rights are reserved. Information has been obtained by Administrative Retirement Services, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Administrative Retirement Services, Inc. or others, Administrative Retirement Services, Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Readers should seek specific advice before acting with regard to the subjects mentioned here. |