Lower costs for employers

Most employers include a provision in their 401(k) plan that allows the plan to cash out former employees with balances of $5,000 or less. Employers choose to remove these former employees from the 401(k) plan because it reduces both the employer’s burdens and costs to administer the plan and the ongoing fiduciary liability associated with maintaining accounts for former employees. Former employees receive notice of the mandatory cash-out from their former employer and can choose where to send their balance. If they don’t respond to the notice, the former employer must roll over cashed-out balances above $1,000 – and may also, but are not required to, roll over balances less than $1,000 – to an individual retirement account (IRA) for the former employee at a qualified custodian like Millennium Trust. The opening and funding of this new account in the name of a “non-responsive” former employee is referred to as an automatic rollover. These IRAs are portable, meaning the former employee has many choices of what they can do with their new account. They can choose to keep the account with the IRA provider that received the automatic rollover or, among other options, transfer the funds at any time to another IRA provider or to a current employer’s 401(k) plan.

Plan sponsors follow a safe harbor when automatically rolling over the balances of missing or non-responsive former employees. The safe harbor requires, among other things, the funds to be rolled over into IRAs at a qualified custodian like Millennium Trust and initially held in an investment that preserves principal and provides a reasonable rate of return, consistent with the liquidity of the investment. If a plan sponsor complies with the simple requirements of the safe harbor, it will not be subject to fiduciary liability under ERISA (Employee Retirement Income Security Act) for its choice of automatic rollover provider or the initial investment. 

When balances are rolled over to Millennium Trust, we open a separate automatic rollover IRA in each individual former 401(k) plan participant’s name. Funds are safeguarded in a principal-protected asset until the individual account owner takes control of the IRA and chooses what to do with their funds. 

We use our comprehensive search-and-engage services to find individual account owners and send them a welcome kit so they can claim their account. Once we reconnect the account owner with their hard-earned retirement savings, what happens next is up to them. They can continue to save for retirement through their Millennium Trust IRA in a variety of investment options, transfer their savings to another IRA provider, or request to transfer the funds to their current employer’s 401(k) plan. Account owners also can take a distribution if they need it to cover an immediate expense, though they are informed that this could trigger taxes and early withdrawal penalties. 

Automatic rollover IRAs ensure individuals’ retirement savings are protected in a tax-advantaged account within the retirement system. The individual can continue saving for retirement on a tax-advantaged basis by investing the funds in their account or transferring them to another IRA provider or to an eligible 401(k) plan. The alternative — an individual receiving the money directly – not only reduces their tax-advantaged retirement savings, but in most cases also results in taxes and early withdrawal penalties for the individual. 

We began working on our solution after federal laws were enacted in 2001 to reduce retirement savings leaving the system prematurely (often referred to as “leakage”). We officially introduced our automatic rollover solution in 2005 after the federal government published final automatic rollover safe harbor regulations for employers. As an industry leader in rollover solutions, we've continued to serve as a vocal partner in the industry, while investing significant resources to refine our solution. Today, we work with recordkeepers and third-party administrators (TPAs) to provide automatic rollover services to tens of thousands of their plan sponsor clients, and we invest millions in our services and technology to continue improving our automatic rollover solution.

Our search-and-engage services are the most comprehensive in the industry. People often move and forget to update their addresses with their employer, but we’re still able to find more than 90% of people whose balances are rolled over to Millennium Trust. Once we find an individual using the latest search technology, we send them a welcome kit and provide information, education and options for what they can do with their money.  

We continually revisit, refine, and invest in our search-and-engagement technology, leveraging key industry providers to improve our ability to find and engage missing and non-responsive participants and reunite them with their funds. In cases where we are unable to engage an IRA owner through our initial search, we continue searching for and communicating with the individual to encourage them to actively take control of their account. 

Recently, Congress passed SECURE Act 2.0, which creates a national database for Americans to find lost retirement accounts. This will make it easier for retirement savers to know when they have retirement savings at Millennium Trust and for us to reconnect those individuals with their hard-earned savings. 

Once an IRA is opened, we mail a welcome kit to the IRA owner. The comprehensive kit includes information about Millennium Trust, including how the IRA is invested and how to contact us, as well as our fee schedule, account agreement and important disclosures. We encourage individuals to engage in their retirement journey by offering them: 

• A streamlined online experience and dedicated client service team that helps people navigate our tools so they can achieve their retirement goals; 

• Tools and educational resources to help clients on their retirement journey;  

• Access to a wide range of choices, including mutual funds and ETFs, in which an individual may choose to invest their retirement savings; and 

• Simple, secure online access for the participant to either transfer their funds to another IRA provider or a 401(k) plan, or take a distribution. 

Each IRA owner may choose to receive online, real-time access to their account information and statements. We also perform tax reporting for IRAs, including Forms 1099 and 5498.  

Per the automatic rollover safe harbor, IRA funds are initially held in FDIC-insured, interest-bearing bank accounts or in another investment that preserves principal and provides a reasonable rate of return, consistent with the liquidity of the investment. The employer who establishes the IRAs on behalf of its former employees chooses the initial investment vehicle. This preserves the individual’s savings until the individual account owner takes control of their IRA, at which point they can choose what to do with their funds.

Millennium Trust’s automatic rollover solution has always supported portability of an IRA owner’s funds when the account owner chooses to do so, and we are dedicated to making rollovers from a Millennium Trust IRA as easy as possible. In most cases, it takes no more than five to seven minutes to complete a roll-in request through our online portal today. 

Whether an individual wants to consolidate retirement savings in another IRA or in a 401(k) plan, transferring funds from provider to provider can be cumbersome since there are so many retirement system providers, and most have different technology requirements and procedures. We are committed to individual choice and the portability of retirement savings and are actively working with IRA providers and recordkeeper partners to remove friction from these processes.