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DOL Eases Automatic Transfer of Left-Behind 401(k) Dollars to New Plans

August 07, 2019 / Stephen Miller

New guidance from the Department of Labor (DOL) should make it easier for employers to transfer former employees' small-balance 401(k) funds to their new employer's 401(k) plan, as long as the employees do not opt out of the transfer. The exemption removes a requirement that 401(k) participants consent to having a balance of $5,000 or less rolled into their new employer's plan. Currently, employers, as 401(k) plan sponsors, can automatically roll over a former employee's 401(k) balance of up to $5,000 to a safe harbor individual retirement account (IRA). The new guidance, however, allows employers to participate in an automatic portability program that goes a step further and ultimately transfers small-balance 401(k) funds to an ex-employee's new 401(k) plan. The DOL published Prohibited Transaction Exemption (PTE) 2019-02 in the July 31 Federal Register. The exemption was requested by Retirement Clearinghouse (RCH), a Charlotte, N.C.-based provider of portability s...