IRS, Treasury Issue Automatic Rollover Guidance

December 28, 2004 ( - The Treasury Department and the Internal Revenue Service (IRS) released guidance on the new automatic, or default, rollover rules for qualified retirement plans Tuesday.

>The guidance attempts to make clear issues regarding the new automatic rule, which requires the mandatory distributions of more than $1,000 from a qualified retirement plan be rolled over into a individual retirement account (IRA) unless the participant opts for another plan to be used (See DoL Releases EGTRRA IRA Rollover Rule ). The guidance is in response to queries received by the IRS, Treasury, and Department of Labor.

>Some examples of guidance issues include:

  • Automatic rollover requirements apply to governmental and church plans, although a transition rule is provided for these plans to comply.
  • All plans have until the end of 2005 to establish administrative procedures for processing the rollovers.
  • Rollover IRAs can be set up without a plan participants’ permission.

>The guidance also includes a sample amendment that plan sponsors can use to amend plans in order to be in compliance with the new rules.

>The complete guidance document is available  here .

>According to a  news release , the rules, which were added to the tax code as part of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), will not take effect until March 28, 2005.