ICI Comments on Proposed Automatic IRA Rollover Regulations

Washington, DC, April 2, 2004 - The Institute strongly supports the ability of retirement plan sponsors to effectively utilize the automatic rollover provisions enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and recently submitted comments to the U.S. Labor Department regarding proposed changes to those provisions.

Background
EGTRRA's automatic rollover provisions require retirement plans with cash-out rules to automatically roll over certain balances (generally between $1,000 and $5,000) into an Individual Retirement Account (IRA), unless the participant elects otherwise. However, recently proposed automatic rollover regulations contain restrictions on fees that will be so difficult to administer, relative to any benefit they may provide to individual IRA owners, that many financial services firms may be discouraged from offering automatic rollover accounts.

ICI Position
In its letter, the Institute urges the Labor Department to:

clarify the scope of its regulatory safe habor guidance to provide that a participant will be treated as having exercised control over assets in an automatic rollover account 1 year after the rollover is made;
eliminate the restriction in the proposed safe harbor that limits IRA maintenance fees to the income earned by the IRA; and
delay the effective date of the automatic rollover rules to 1 year following the Labor Department's issuance of final safe harbor regulations.

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