Retirement plan sponsors are allowed to automatically roll over participant account balances of up to $5,000 into an individual retirement account (IRA) if a participant doesn’t make a distribution selection on his own or cannot be found, and some take advantage of this due to the administrative costs of keeping those participant accounts in their plans.
A new calculator from Millennium Trust, the Automatic Rollover Savings Calculator, allows plan sponsors to see their potential cost savings by getting rid of these accounts. Plan sponsors input the number of participants in their retirement plan, the percentage of those with small balances, and the approximate annual cost of administering their plan, and the tool calculates the potential savings.
However, the firm does warn that the calculator assumes that annual administrative costs are allocated equally among plan participants and may not be representative of a plan sponsor’s particular plan design or experience. It encourages plan sponsors to seek advice from qualified professionals regarding all finance issues impacting their plan.