Protecting your clients' 401(k)s

By Paul Cross

Annuity National Brokerage Co.


On the job, in-service, non-hardship, under age 59½, 401(k) transfers to safety are salvaging retirement plans from market risk, and combined with the new Roth conversion privileges, they are helping people to develop retirement income for life, income-tax-free.

The Employee Retirement Income Security Act (ERISA), the Pension Protection Act (PPA), and the Tax Increase Prevention Reconciliation Act (TIPRA) have combined efforts to the benefit of every American.

Continuous loss of retirement plans and retirement income due to risk triggered new legislation permitting employees to make "on the job" in-service, non-hardship 401(k) transfers to IRAs and ROTH IRAs.

Fortune 1000 companies and many other employers have modified their plan documents to comply with the new legislation to permit in-service transfers. If your employer groups have not yet modified their plan document to permit the 401(k) transfer to a self directed IRA or Roth IRA, send them a copy of this article as an enclosure to your personal letter requesting that the employer amend their plan document to conform to the new ERISA regulations.

Unfortunately, many companies, employer groups, and employees are not aware that ERISA allows 401(k) transfers without the necessity of a hardship, age 59 ½, or separation from service. Employees may transfer the vested portion of their 401(k) and continue contributions into the 401(k).

Plan administrators and investment brokers should be aware of the transfer rules and provisions, but it may not be to their advantage to update the employing company.

Here is all that is required: Amend the company plan document to permit under age 59½ in-service transfers. The employer simply notifies the third party administrator to amend the plan document to include in-service, non-hardship, under age 59½ transfers.

Don't leave your clients' 401(k)s to chance. You may use the following sample letter to make employers aware of the new ERISA.

Sample letter to employers:

Providing employees with the best retirement plan options and choices is a major concern to all employers. Keeping abreast of all new laws and tax privileges is no easy task.

I'm happy to announce that the Employee Retirement Income Security Act (ERISA) and other tax laws now permit "on the job" in-service, non-hardship, under age 59 ½ transfers to IRAs and Roth IRAs, giving the employees greater control, safety, and the opportunity to take advantage of the Roth IRA conversion privilege under the Tax Increase Prevention Reconciliation Act (TIPRA).

I'm enclosing a copy of The Roth Report, which highlights the advantages of Roth IRA conversions offering all Americans the opportunity to permanently freeze taxation on retirement plans.

Action required: Advise your plan administrator to amend the plan document to permit in service transfers.

There should be no cost involved and this amendment is a part of your fiduciary obligations and will therefore relieve your company of liability while improving employer/employee relations.

Sincerely,

P.S. Your employees will greatly appreciate your action.

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