Where great minds meet Honeycomb Connect
Home | My Cell | Help | Contact Us
Select Hive/Cell
Corporate H.R. Officers (C.H.R.O.M.E.)
March 18, 2018  
Corporate H.R. Officers (C.H.R.O.M.E.)
Human Resources Home
Links and Resources
Industry Events
Solutions Exchange e-Gallery
About Honeycomb Connect
Membership Benefits
Become a Sponsor
Contact Us
Human Resources HomeNewsHeadlines
Deadline looms for automatic 401K rollover rules
March 2, 2005
...back to list

Charlotte, N.C. -- A series of new federal laws slated to come into effect next month will provide welcome relief from a popular employer practice of automatically cashing out smaller retirement accounts, triggering fees, taxes and penalties.

The process of "rolling over" tax-deferred retirement accounts is a familiar one to many of the estimated 10 million Americans who change jobs each year. They face lengthy and complicated paperwork to rollover their 401(k) or 403(b) accounts. They could do nothing and keep their accounts with their former employer. Or they could cash out the accounts, triggering taxes and fees that can add up to 40 percent of their savings.

But until now, those with smaller balance accounts - between $1,000 and $5,000 - may not have had a choice. Employers, unwilling to incur the expense of maintaining these smaller accounts, often automatically cashed out these accounts. But as of March 28, 2005, when Department of Labor guidelines under the "Economic Growth & Tax Relief Reconciliation Act" (EGTRRA) take effect, employers will be required to automatically roll these accounts over into other tax-deferred retirement accounts.

This is good news for employees, according to Reginald Bowser, president and CEO of RolloverSystems, which automates the rollover of retirement accounts for individuals, for employers and for financial brokers and advisors.

"Often those with smaller retirement accounts are young people who are just beginning to grow their retirement nest egg," says Bowser. "If they receive a cash-out check, they usually spend it. EGTRRA provides much needed protection of their financial futures."

This month, RolloverSystems processed what they believe is the country's first batch of automatic rollovers to a "safe harbor" IRA that would comply with EGTRRA rules. The automatic rollovers were carried out on behalf of 108 former employees of a major car company that was spinning off a division and terminating its 401(k) plan. The transactions were completed in partnership with HR XCEL, a human resource consulting firm based in Charlotte, N.C.

"It's an idea whose time has really come," says Bowser. "Employers want an easier way for participants to roll over to IRAs, and so do their employees. Plus, we offer an independent, objective service with IRA choices from top investment companies."

Companies that implement RolloverSystems' completely digital, all-inclusive, finance technology are able to lower plan administration costs, comply with new federal automatic rollover requirements, and enhance their employee benefits package. Employees fill out an electronic form, compare competing IRA products and choose form among several top-tier financial institutions, including Fidelity Investments, Charles Schwab & Co., American Century Investments, JPMorgan Chase, TD Waterhouse and Harrisdirect.

Printer-friendly version
E-mail this to a friend
Comment on this story
...back to list
Member Site Tour
User Name:


Forgot password?
My Cell | Help | Contact Us Privacy Policy | Legal disclaimers
Copyright © Honeycomb Connect