Millennium Trust Blog

What’s Ahead: Industry Trends That May Affect Safe Harbor IRAs

September 27, 2018
By Terry Dunne
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Demand for Automatic Rollover IRAs is continuing to increase, thanks in part to several factors we cover here. We recently wrote a whitepaper detailing the history of automatic rollovers, current trends, and their future outlook. This is the last in a series of five posts from the new whitepaper, Automatic Rollover IRAs: From Legislative Footnote to Fiduciary Best Practice.

From the proposed reform of Form 5500 to DOL audits of search processes, a variety of regulatory and industry trends are driving demand for automatic rollover IRAs.

The Modernization of Form 5500

Government concerns about plan practices may have been a factor in proposals to modernize Form 5500. While the precise nature of the changes and the timing of implementation have not yet been finalized, proposals suggest the revised Form 5500 will require plan sponsors to provide more detailed information.

It’s possible that more complete data will help plan sponsors, fiduciaries, and participants by improving benchmarking, providing greater clarity around fees, and offering other actionable data. There is also a chance newly improved Form 5500s will improve agencies’ ability to identify anomalies and compliance issues.

IRS and DOL Search, Distributions, and Uncashed Checks Audits

The DOL has begun auditing the management of accounts belonging to missing and unresponsive participants. Primarily, the agency’s focus has been on the search process.

The audits have been frustrating for plan sponsors and, possibly, auditors. It’s difficult for plan sponsors to implement a compliant search process when no unified, formal set of guidelines has been issued for active plans. That may also explain why the American Benefits Council sent a letter to the DOL protesting inconsistent and aggressive positions taken by auditors with regard to the accounts of missing and unresponsive participants.

Recordkeepers Outsourcing to Specialist Safe Harbor IRA Providers

Just as litigation and fee compression caused some plan service providers to outsource non-core recordkeeping functions, increasing government scrutiny of search processes may be a driver behind plan service providers outsourcing automatic rollovers to firms that specialize in small balance accounts and have well-defined missing participant search processes.

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The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.

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