Treasury and IRS Plan Would Push 401(k) Rollover Work Onto Recordkeepers

Treasury and the IRS have proposed guidance to standardize how 401(k) assets move into IRAs, aiming to shift the administrative weight from plan participants onto recordkeepers ^[1][2]. For advisors, that would replace a workflow built on phone calls, faxes and mailed checks with electronic transfers coordinated directly between institutions ^[5][10].

Direct rollovers are already possible, but the proposal would create standardized forms and procedures for financial institutions to coordinate the transfer ^[3]. Today the participant does the running: they contact the receiving IRA provider, then the old recordkeeper, and complete documents and verification for both, after which the old plan may cut a check payable to the new institution and mail it to the participant to forward on ^[9]. Under the proposal, the participant requests the rollover through the receiving institution, which communicates directly with the old recordkeeper, verifies the details, and moves the money electronically with no checks ^[10]. If approved, the change could save clients dozens of hours ^[4].

The friction is documented. In a 2024 Government Accountability Office survey, 25% of participants who had recently completed a plan-to-plan rollover said there were too many steps, 26% said it took too much time or effort, and 20% said their old and new plans did not work together to process the request ^[6][7][8]. Robert Persichitte, an advisor with Delagify Financial, described the current process as a "hellish nightmare," recalling weeks of phone calls, faxes and mail on his worst cases ^[5].

Advisors should note who benefits from the status quo. Daniel Kopp of Wise Stewardship Financial Planning said rollovers are straightforward with major custodians such as Fidelity, Vanguard or Empower, but that others make it painful as an asset-retention strategy ^[11]. When firms make it difficult, he said, many clients, including some of his own, simply give up and leave the money where it is ^[12].

The limit is that the standardized process is optional ^[13]. Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, said Treasury and the IRS stopped short of mandating electronic transfers because that would force many institutions into potentially expensive recordkeeping upgrades ^[14]. The proposal makes the process more efficient, he said, but there are further improvements that would make it more efficient still ^[15].