QUALIFIED RETIREMENT PLAN ALERT

            Employers who sponsor qualified retirement plans, such as 401(k) or profit sharing plans, should be aware of a new requirement concerning automatic distribution of account balances of less than $5,000 upon a participant's separation from service (a "cash-out").  This new rule states that distributions in excess of $1,000 and not more than $5,000 made without a participant's consent are required to be rolled over to an IRA selected by the plan fiduciary (the employer or plan trustee).  Distributions on or after March 28, 2005 , are subject to these new automatic rollover rules.

            If your Plan currently provides for the automatic cash-out of participant balances up to $5,000, this new rule is likely to be administratively burdensome.  A relatively simple solution is to amend the cash-out provision so that it applies only to participant balances up to $1,000, thus eliminating the need to set up IRA accounts to receive cash-out rollovers for amounts over $1,000.

            For calendar year plans, such an amendment must be adopted on or before December 31, 2005 .  However, compliance with the cash out provision, as amended, must begin on March 28, 2005 .  Therefore, it is very important to communicate with your administrative service provider prior to making cash-out distributions after this date.

            We would be pleased to discuss this new rule in more detail if you have any questions.  Please contact Arnie Page at 856-722-5300 ext. 202.