Principal Bank has introduced a new Roth IRA option to give plan sponsors a place to put the low-balance retirement accounts of departing employees.
The bank, a unit of Principal Financial Group Inc., Des Moines, is offering the option to employers with 401(k) and 403(b) plans. The product, the Principal Bank Safe Harbor IRA, enables plan sponsors to fulfill a requirement that allows low-balance Roth 401(k) and 403(b) accounts of departing employees be rolled into an IRA, if the employer doesn’t want to retain the accounts. The option would help employees preserve the tax-advantaged status of their retirement funds when they switch jobs.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, when employees leave, employers must roll over amounts between $1000 and $5000 left in their 401(k) or 403(b) accounts into an IRA, unless the participant chooses otherwise.