Regulatory Updates

Auto-Portability Legislation Introduced

Senators Tim Scott (R-SC) and Sherrod Brown (D-OH) have introduced the Advancing Auto Portability Act of 2022, aimed at reducing retirement “leakage” by allowing for automatic rollovers of certain accounts to follow workers to another employer plan.

The proposal 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

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