October 1, 2024
Plan sponsors use automatic rollover IRAs to help reduce administrative burdens and costs associated with maintaining accounts for former employees who have small balances in their employer-sponsored retirement plans. Automatic rollover IRAs also provide a simple, streamlined process for former employees to keep building their retirement savings, even after they leave their job.
According to the U.S. Census Bureau, nearly half of Americans between the ages of 55 and 66 have $0 in retirement savings. Cashing out retirement savings early, often referred to as retirement or 401(k) leakage, is one of many reasons why people are financially unprepared for retirement. The law requires
Typically, a workplace retirement plan such as a 401(k) will have a provision that allows employers and plan sponsors to remove former employees with balances of $7,000 or less from their retirement plan. This provision helps to reduce employers’ costs and administrative burdens. Former plan participants receive a notice from
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