Revenue ruling eases administrative rollover burden

In an effort to make workplace retirement savings more portable and to help build assets in tax-qualified retirement plans, the Treasury Department and Internal Revenue Service have removed a cumbersome step plan sponsors must take when accepting rollovers from other employers’ plans.

IRS Revenue Ruling 2014-09, effective immediately, allows the plan administrator for the receiving plan to now simply check a recent annual report (Form 5500) filing for the sending plan on a public database.  This eliminates the need for the two plans to communicate (with the individual as go-between), expedites the rollover process, and reduces associated paperwork, says the IRS.

“What a plan sponsor had to do before was take on the responsibility and the risk that the employee’s rollover actually came from a clean and compliant 401(k) plan,” says Marina Edwards, senior consultant, benefits advisory and compliance with Towers Watson in Chicago. “If they had accepted rollover money from a plan that had compliance defects – even a little teeny $1,500 rollover – it had the potential to disqualify the compliance of the receiving plan.”

The new ruling, she says, is “one small step that helps alleviate that potential fiduciary risk.”

Also see: Greasing the skids on 401(k) rollovers

“All too often, individuals moving from one job to another find it too difficult to take their retirement plan savings with them to a new employer,” said J. Mark Iwry, senior adviser to the Treasury Secretary and deputy assistant secretary for retirement and health policy, in a statement.  “This guidance is designed to make it easier for people to roll over their retirement savings to a new employer plan when they change jobs, helping them preserve and accumulate assets for retirement.”