The Labor Department is seeking public comment on an “auto-portability” program intended to help workers consolidate small 401(k) and IRA balances when they change jobs.
Under the plan, according to Labor’s Employee Benefits Security Administration, “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.”
Employees with small account balances in their company’s 401(k) plan often either take a distribution of their retirement savings or move the account into an IRA when exiting. The same outcome frequently occurs with small retirement accounts when a company terminates its 401(k) plan, according to EBSA.
“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,” EBSA said.
While the Employee Retirement Income Security Act and the Internal Revenue Code prohibits a plan or IRA fiduciary from using its discretion to cause the plan or IRA to pay the fiduciary a fee, Labor said that it has the authority “to grant exemptions that are protective of and in the interests of plan participants and IRA owners.”
EBSA said it welcomes innovation in the area of retirement asset portability and encourages additional proposals.
Interested persons can submit comments and/or hearing requests to EBSA either by email to: firstname.lastname@example.org, or by fax to (202) 693-8474 within 45 days.
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