DOL Final Regulation Requires Amendment To Automatic Cash-Out Provisions

On September 28, 2004, the U.S. Department of Labor (DOL) issued a final regulation allowing plan fiduciaries to satisfy their fiduciary responsibilities regarding the automatic rollover to individual retirement accounts (IRAs) of certain mandatory distributions. As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the Internal Revenue Code was amended to require that absent an affirmative election by the participant, distributions from qualified plans between $1,000 and $5,000 must be transferred directly to an IRA. The proposed regulation issued in March 2004 indicated this provision would not take effect until a safe harbor regulation regarding plan fiduciaries’ designation of the IRA provider and selection of initial investment elections was issued. Now that the final regulation has been issued, plans with automatic cash-out provisions should be amended. The new regulation applies to the rollover of mandatory distributions made on or after March 28,