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Automatic Rollover IRAs for Missing or Non-Responsive Participants
Automatic rollover IRAs were created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). It allows companies to roll over funds for missing and nonresponsive participants to a qualified custodian that will establish and administer a rollover IRA in each participant’s name. This not only helps companies reduce their expenses, but also is an effective means of reuniting ex-employees with their retirement funds and providing them with the potential to maintain their accounts on a tax-deferred basis. For more detailed information about Automatic Rollover IRA regulations click here.
Colorado National Bank’s Solution!
Colorado National Bank (“CNB”) has created an Automatic Rollover IRA program which satisfies the DOL safe harbor provisions, thereby allowing employers to reduce their administrative burden, fiduciary liability and plan management expenses. Once the employer establishes an Automatic Rollover IRA on behalf of a former employee, that person is no longer a participant in the employer’s plan.
Do you have former employees who have left small balances in your company’s retirement plan? If so, you are not alone. Employers are often faced with the burden of having to maintain account balances in their company’s retirement plan for missing or non-responsive participants, either because the ex-employee has moved, forgotten about it, or passed away. Whatever the reason, it creates a number of ongoing issues for employers:
Highlights of CNB’s Automatic Rollover IRA Program
- Easy set-up process
- No cost to Employer/Plan Sponsor, TPA, or Record Keeper
- No account minimums
- One Master Adoption Agreement (covers all non-responsive participant IRAs
- DOL safe harbor compliant
- Eliminates employer expenses
- Limits employer exposure to fiduciary risk
- Eliminates employer’s need to track former employees
- Eliminates unnecessary taxable event
- CNB continues to try and locate the former employee and registers the non-responsive participant with the National Registry of Unclaimed Retirement Benefits
- Participant’s assets invested in FDIC insured interest bearing account
- CNB services the participant once we make contact
- Participant can elect to keep IRA with CNB, take distribution, transfer to another IRA, or have funds deposited into their new employer’s plan
- CNB’s IRA fees are compliant with regulations and are charged to the ex-employee’s IRA
Colorado National Bank (as a qualified Custodian) will accept and administer Automatic Rollover IRAs regardless of their size, including those under $1,000.
Comprehensive Search for Missing or Nonresponsive Participants
Colorado National Bank will continue the Plan’s efforts to locate missing participants. We have developed comprehensive procedures to track down missing or nonresponsive participants, including, but not limited to:
- Mailing information to the last known address;
- Utilizing a third party firm, i.e., Risk Compliance Solutions, LLC, to perform searches;
- Utilizing external internet search engines; and
- Registering the account with the National Registry of Unclaimed Retirement Benefits.
FDIC Insured Investment Vehicle
Unlike a number of other companies who send participant funds to outside entities, CNB invests missing participant funds in its own in-house FDIC insured savings account designed to minimize risk, preserve principal, and maintain liquidity. Our Automatic Rollover IRA program pays a competitive interest rate and provides participant’s access to the funds at any time.
Simplified Documents and Technology
CNB offers plan sponsors a master IRA adoption agreement that only requires a single signature to be provided on behalf of all missing or non-responsive employees. We have also developed the technology that allows us to accept a data export directly from your TPA or record keeper to automatically create and fund the IRAs.
How to Get Started!
The employer (or Plan Sponsor), as fiduciary of the employer’s retirement plan, must:
- Sign CNB’s Automatic Rollover Services Agreement.
- Sign CNB’s Master Automatic Rollover IRA Adoption Agreement. (This Agreement only needs to be provided once per plan.)
- Provide CNB with Participant Information. Information to include the name of the employer/plan sponsor, the name of the plan, the name of the record keeper or TPA, participant(s) name, last known street address, social security number, date of birth, date of termination, and a breakdown of retirement plan funds, e.g., pre-tax/after tax funds or Roth 401(k) balances
Transfer participant funds to CNB. Funds may be sent by wire, ACH, or by check.
- Once CNB receives the above referenced documents and funds it will create an IRA for the participant. CNB will then complete an IRA Adoption Agreement for the participant and send it, along with other information about the IRA, to the last known address of the participant/IRA holder. If the address is no longer valid, CNB will continue efforts to locate the non-responsive participant.
Download an Automatic Rollover IRA Kit Today (click here)
If you have any questions concerning CNB's Automatic Rollover IRA Program, please contact:
Paul E. Maxwell
Colorado National Bank
SVP Retirement Plans Division