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additional helpThe 2001 tax act (EGTRRA) provided that tax-qualified plans must provide that cash-outs of amounts exceeding $1,000 must be transferred to an individual retirement plan if the participant doesn't affirmatively elect a rollover or direct distribution of the amount. This provision was not to become effective until the DOL had issued regulations providing a safe harbor for fiduciaries who must implement the requirement.
Today, the DOL has published FINAL regulations (attached) providing such safe harbor for fiduciaries which will be effective as of March 28, 2005. The regulations have been modified to provide a safe harbor for mandatory distributions of less than $1,000, in addition to those in the $1,000 to $5,000 range.
With the final regulations, the DOL also has published a final prohibited transaction exemption (attached) which will allow certain financial institutions themselves to be the trustee or custodian of the individual retirement plan to which a safe harbor rollover is made.
Thus, because final regulations have now been published, the mandatory automatic rollover provisions of the Code will begin applying to distributions made from tax-qualified plans as of March 28, 2005.