DOL creates safe harbor for automatic cash-outs of small retirement plan accounts

National Underwriter Life & Health, October, 2004 by Allison Bell

THE U.S. DEPARTMENT OF LABOR has released the final version of a "safe harbor" regulation that could create more than $11 million in business for retirement plan advisors.

The rule, Fiduciary Responsibility Under the Employee Retirement Income Security Act of 1974 Automatic Rollover Safe Harbor, affects workers who are leaving their employers and have less than $5,000 in vested assets.

Some plans require the departing workers who have those small accounts to cash out immediately.

The Economic Growth and Tax Relief Reconciliation Act of 2001 lets plan fiduciaries roll the "mandatory distributions" into individual retirement accounts or individual retirement annuities when the departing employees fail to give other instructions.

Officials...