Auto-Portability Legislation Introduced in House

Representatives Brad Schneider (D-IL) and Ron Estes (R-KS) have introduced HR 9252, Advancing Auto-Portability Act, to reduce retirement leakage by allowing automatic rollovers of certain accounts to follow workers to another employer plan.

Like its companion introduced by Senators Tim Scott (R-SC) and Sherrod Brown (D-OH) earlier this year, the bill would allow an “automatic portability provider” to effectuate the rollover of mandatory cash-out distributions that were rolled over to an IRA to be subsequently rolled over to an employer-sponsored plan once the account owner has received advance notice of the rollover and does not otherwise opt out of the transaction. Responsibilities of the automatic portability provider include

• Acknowledging in writing that the provider is a fiduciary with respect to the IRA account owner
• Gaining approval in writing by the fiduciary of the receiving plan of any fees and compensation received by the provider and ensuring that compensation is reasonable
• Providing a pre-transaction notice to the account owner at least 30 days prior to the rollover transaction that includes a description of the transaction, applicable fees, the right to opt out, and details on how the individual can make an election
• Providing a post-transaction notice within three business days after an automatic portability transaction has occurred that indicates the action taken and all relevant information regarding the location and amount of the transferred assets, statement of fees, and the telephone number of individual to contact with questions
• Offering transactions on the same terms to any plan regardless of whether other services are provided to such plan

Eligible employers may receive a $500 tax credit for the adoption year of the automatic portability arrangement.