Washington – The ERISA Industry Committee (ERIC) submitted comments to the Internal Revenue Service (IRS) on new guidance meant to make it easier for workers to move retirement savings from one plan to another. ERIC supports the goal and asks the IRS to cut the number of steps, protect plans that follow the process, and encourage electronic transfers rather than paper checks.
When workers change jobs, they can move their savings into a new employer’s plan or an IRA. This is called a rollover, and it can involve paperwork, delays, and sometimes a paper check in the mail. In the SECURE 2.0 Act, Congress told the Treasury Department to simplify and speed up the process.
“Workers should be able to move their savings from one plan to the next without a pile of paperwork and long waits,” said Andy Banducci, Senior Vice President, Retirement and Compensation Policy at ERIC. “The IRS has made a solid start, but the plans would be sending requests and approvals back and forth too many times. Fewer steps, electronic data instead of paper, and clear protection for plans that follow the rules would get workers’ money where they want it faster and with fewer errors.”
ERIC’s comments make three main points:
Cut the back and forth. The proposed process could cause delays, confusion, and higher costs. ERIC suggests combining the five steps, possibly down to two, and replacing paper and PDF forms with electronic data that computer systems can read on their own.
Protect plans that follow the process. The IRS says it is considering a “safe harbor,” which would let a plan rely on the sample forms in good faith. ERIC strongly supports this and wants it to be broad. The safe harbor should cover plans whose recordkeepers carry out the steps, shield them from mistakes made by other plans or financial institutions, and be coordinated with the Department of Labor so plans are also protected from legal claims, including those tied to fraudulent rollover requests. ERIC also asks that plans be able to conduct reasonable anti-fraud measures, such as multi-factor authentication and phone verification.
Move to electronic transfers, with time to get there. ERIC supports direct transfers between plans instead of checks sent to the worker, which are more secure and less likely to be lost or delayed. It recommends a transition period, perhaps two years, so recordkeepers can build the necessary systems, and a narrow exception for paper checks when a worker asks for one. Read ERIC’s full comments here.