Exemption for certain automatic portability transactions

Apr 21, 2023 | 2024, Retirement Plan Law

Currently, in most cases, a plan may distribute a terminated participant’s account balance without their consent if the balance is under $5,000 – a “force-out” distribution. Current law also requires an employer to roll over this distribution into a default IRA if the account balance is at least $1,000 and the participant does not affirmatively elect otherwise.

Plans are permitted to provide automatic portability services. Such services would involve the automatic transfer of a participant’s default IRA (established in connection with a distribution from a former employer’s plan) into the participant’s new employer’s retirement plan, unless the participant affirmatively elects otherwise. Further guidance is expected regarding the facilitation of these types of transfers.


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