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Benefits Update
May 27, 2005
M& I 401(k) Amendment
Automatic Rollovers and Mandatory
Distributions
Last fall
the Department of Labor (DOL) issued final rules regarding the requirement under
the Economic Growth and Tax Relief Reconciliation Act of 2001 that involuntary
cash-out distributions between $1,000 and $5,000 must be automatically rolled
over to an IRA rather than paid in cash to the participant.
On
December 28, 2004, the Internal Revenue Services (IRS) issued Notice 2005-05
that clarified the DOL’s final rules. In the Notice 2005-05, the IRS indicated
that Plans must be amended to comply with the new rules by the last day of the
plan year ending after March 28, 2005 (December 31, 2005, for calendar year
plans).
JP Morgan
Retirement Plan Services and JP Morgan Invest are designing a service offering
that meets the requirements of the DOL’s final rules. JP Morgan Invest, a
qualified IRA provider under the DOL definition, will begin accepting rollovers
between $1,000 and $5,000 commencing July 1, 2005. Rollovers of amounts less
than $1,000 will not be accepted.
If the employee terminates their
employment and their vested account balance does not exceed $5,000, their entire
account balance will be distributed to the employee. The employee may elect for
the cash distribution, roll it over to an IRA or to another retirement plan of
their choice.
If the employee terminates their
employment and has a vested balance greater than $1,000, and no election is
made, the distribution will made in the form of a direct rollover to the JP
Morgan Invest IRA Plan. The employees will be charged with any fees applicable
to the establishment and maintenance of the account.
If the employee terminates their
employment and has a vested balance greater than $5,000, a distribution will not
be made without the employee’s consent until he/she reaches the later of age 62
or the Plan’s normal retirement age.
Attached is the
Summary of Material Modifications for your records.
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