Why Safe Harbor IRAs Remain a Preferred Plan Management Solution

Whether it’s the gig economy, pandemic-related job displacement, or the search for a life/work balance, the increase in employee turnover contributes to the number of small balance accounts left behind in employer-sponsored retirement plans. For the companies holding these forgotten accounts, the situation can significantly inflate their fiduciary risks and plan administration expenses. Many plan sponsors have addressed these challenges in recent years through the versatility and flexibility of automatic rollover solutions involving Safe Harbor IRAs, such as Millennium Trust’s Automatic Rollover Solution.

As a plan management tool, Safe Harbor (or Automatic Rollover) IRAs remain just as relevant today as they did in 2001 when legislation was signed to protect forgotten retirement accounts until their owners reclaim them.

What to look for when assessing a Safe Harbor IRA provider

When selecting a Safe Harbor IRA provider, a sound due diligence process should consider the following factors:

• Automation and Execution: An automated and secure online execution process is critical to the rollover experience and for the client service experience of the account owner.
• Experience and Expertise: Given the importance of maintaining the tax-advantaged status of funds and meeting the requirements of the safe harbor, deep experience is advisable.
• Plan Sponsor Support: In addition to an easy and flexible sign-up process, access to dedicated relationship managers improves outcomes by providing a direct point of contact.
• Participant Outreach: A provider with sophisticated and best-in-class outreach and procedures can help increase the likelihood of reuniting former participants with their savings.
• Account Owner Experience: Former participants should be able to manage their accounts online and have access to knowledgeable client service representatives who have experience in IRAs, are well-trained on IRS distribution rules, and can assist them in multiple languages.
• Investment Options: Account owners benefit from having the ability to allocate their assets for the long-term and having access to stocks, ETFs, bonds, CDs, and alternative assets to keep their money working for them.
• Fair and Reasonable Account Fees: Consider all potential fees, not just the annual fee. Ask questions, including: Is there a low balance fee policy for very small accounts? Who provides the best overall value?
• No minimum balance requirement: Some providers, Millennium Trust included, can accommodate balances less than $1,000—even when uncashed checks are involved.

A versatile and flexible choice

As a recipient of hundreds of thousands of automatic rollover accounts each year, we are proponents of choice and re-engagement. We offer each account owner who comes to us via an automatic rollover the option of maintaining their Safe Harbor IRA with us for as long as they would like, providing them access to a wide range of investment options—from short-term cash equivalents to alternative assets. But, if they prefer, they can also choose to roll the funds into their new employer’s retirement plan, transfer the funds to another IRA, or cash out.

Providing the options and the resources needed to successfully address their financial circumstances enables account holders to make informed decisions and more fully engages them in their retirement savings activities, which ultimately keeps them in the retirement system.

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