If you are still having problems viewing this message, please click here for additional help

The IRS last week issued Notice 2005-5 (copy attached) which provides guidance regarding the new automatic rollover provisions of the Code applicable to tax-qualified plans. Beginning March 28, 2005, "mandatory distributions" (distributions without a participant's consent) which are eligible rollover distributions that exceed $1,000 must be paid in a direct rollover to an individual retirement plan if the participant, after receiving notice, does not elect to take cash or have it paid directly in a direct rollover.
The new notice provides that "a plan will not be treated as failing to operate in accordance with its terms ... with respect to mandatory distributions merely because it does not process mandatory distributions ... due to a lack of sufficient administrative procedures for automatic rollovers, ... provided the mandatory distributions are made on or before December 31, 2005." Thus, the notice will, in some cases, allow plans to satisfy the new requirement later in 2005.
The notice also provides banks and other financial institutions with relief by stating that the financial institution will not be required to implement its customer identification programs pursuant to the USA PATRIOT Act "until the former employee first contacts such institution to assert ownership or exercise control over the account."
Additionally, the notice also provides that a good faith plan amendment to implement the automatic rollovers is required to be made "by the end of the first plan year ending on or after March 28, 2005" (i.e., by December 31, 2005 for calendar year plans), and provides a sample plan amendment for such purposes.

File Attachments click to download