Consolidation Corner

The Explosion of Small 401(k) Accounts

Posted by Thomas Hawkins on Sep 18, 2017 4:28:54 PM


It’s generally accepted that the small-balance accounts of terminated 401(k) plan participants have been a problem for plan sponsors, resulting in increased plan costs, fiduciary risk and other ancillary problems, such as missing participants and uncashed distribution checks.

Now, based on new information from EBRI and other sources, we’re learning that small accounts are a large and growing problem for active participants as well.

If no action is taken to make retirement savings more portable, an increasingly mobile workforce will ensure that this collective “explosion” in small accounts will exacerbate headaches for plan sponsors. For participants with small accounts, research indicates that bad outcomes will only worsen as they leave savings behind or cash out entirely.

Looking Back: The Impact of Public Policy on Small Accounts

The problem of small accounts -- for both terminated and active participants – didn’t happen overnight, and has been influenced over many years by public policy, resulting in a decidedly mixed bag of outcomes. 

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Topics: Auto Portability, Automatic Rollovers, 401(k) Consolidation, In-Plan Consolidation, Cash Outs, Leakage, America's Mobile Workforce, Auto Enrollment, Retirement Plan Portability, Automatic Rollover, PSCA, Stale Dated Checks, 401k leakage, EBRI

Don’t Wait Until It’s Too Late: Prepare Now for Year-End 401(k) Plan Terminations

Posted by Thomas Hawkins on Sep 6, 2017 9:45:08 AM

As we enter the 4th quarter of 2017, many plan sponsors (as well as their advisors) will face the prospect of terminating a 401(k) plan.  For most, this will be the first -- and only -- time that they’ll undertake this important initiative, typically without the benefit of prior experience.

Unfortunately, many sponsors in this position will realize too late that time is not on their side, and will be scrambling to perform all the steps necessary to effectively terminate their plans.


When conducted properly, a 401(k) plan termination can take up to 4 months, from start-to-finish, and will require significant planning, flawless execution and strict attention to detail.  On the other hand, a poorly-executed plan termination could result in your plan not being properly terminated, which could result in delay, additional expenses -- and even worse -- the scrutiny of a DOL or IRS audit.

To educate sponsors in understanding the basics of terminating 401(k) plans, Retirement Clearinghouse has prepared a three-part video series.

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Topics: Auto Portability, Automatic Rollover

The Exit Bonus Employers Never Intended to Pay

Posted by Spencer Williams on Aug 30, 2017 4:52:05 PM


Without seamless plan-to-plan portability in place to preserve retirement savings when a participant changes jobs, many employers are unwittingly paying “exit bonuses” to terminated employees that they may never have intended to pay.


How the ‘Exit Bonus’ Works

Employer-matching contributions refer to a matching dollar amount contributed by an employer to the retirement savings of an employee who also makes a similar contribution, usually to a 401(k) plan. Typically, these matching contributions are viewed by employees as a tangible, high-value benefit, and by employers as a means to attract and retain the best talent, and improve plan participation and deferral percentage metrics.

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Topics: EBN, Auto Portability, 401(k) Consolidation, Retirement Plan Portability, Retirement Savings Portability

Five Ways to Make Retirement Savings Portability a Priority in 2018

Posted by Neal Ringquist on Aug 22, 2017 11:17:59 AM

It’s become widely-accepted that retirement savings portability is proven to address the small account problem for 401(k) plan sponsors, as well as preserve participants’ savings currently lost to cashout leakage.


However, the concept of retirement savings portability is relatively new. At year’s end, most plan sponsors’ attention will be focused on other plan design issues, such as auto enrollment/escalation, the lineup of investment options, enrollment, education, retirement income solutions and so forth. 


Sadly, many sponsors could miss an important opportunity to make some straightforward changes to enhance portability that can significantly improve participants’ financial wellness, reduce plan expenses and minimize fiduciary liability.


As the end of 2017 approaches, here are five actions that a plan sponsor could take to facilitate retirement savings portability and significantly improve their plans in 2018.


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Topics: Auto Portability, Cash Outs, America's Mobile Workforce, 401k leakage

The Cashout Clock is Still Ticking: Let’s Stop It!

Posted by Thomas Hawkins on Aug 16, 2017 3:06:24 PM



On May 12th, Retirement Clearinghouse announced the National Retirement Savings Cashout Clock, a virtual clock that calculates 2017 year-to-date cashout leakage from America’s defined contribution system in real time.


When it was announced, the Cashout Clock had already registered $24.4 billion in cashouts. 


Since then, the Cashout Clock has relentlessly advanced, adding another $16 billion to cross the $40 billion mark in late July.  As of this writing, $42.3 billion in cashouts have occurred thus far in 2017. If nothing happens to stem the flow, then we’ll reach $68 billion in cashouts by year’s end.

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Topics: Auto Portability, Automatic Rollover

Small Accounts: The Root of Many Problems

Posted by Spencer Williams on Aug 9, 2017 11:25:14 AM


If you’re like most homeowners during these dog days of summer, you’re not just basking in the sunshine or swimming in the pool with your family. You also have a fight on your hands—the war against the dandelions that invade and attempt to occupy your entire lawn every year at this time.

As every experienced gardener knows, you can’t get rid of dandelions by picking their stems. This tactic offers a mere temporary solution to the problem. People may not be able to see dandelions on your lawn for a while, but the roots of those weeds are still in the soil, so they’ll quickly grow back, and might return in greater numbers than before.

You have to attack the root of a problem if you want to win an entire war instead of just individual battles. And what’s true in the war against dandelions is also true for the war against the administrative headaches posed by small retirement accounts owned by terminated participants. These administrative hassles may seem trivial at first, but if left unchecked, can lead to serious problems for defined contribution plan sponsors, such as high expenses and inadvertent fiduciary liability.

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Topics: EBN, Auto Portability, 401(k) Consolidation, Retirement Plan Portability, Retirement Savings Portability

A Big Step Forward for Auto Portability

Posted by Thomas Hawkins on Jul 25, 2017 12:11:50 PM

On July 11th, 2017, a small group of retirement services professionals at Retirement Clearinghouse (RCH)  successfully conducted the first-use of a new and important financial technology.  Known as “locate & match” -- the technology represents a breakthrough in the ability to automatically move small balances forward in America’s defined contribution system, and forms the backbone of RCH Auto Portability.


For the first time, auto portability is now live in America’s defined contribution system.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollover, Automatic Roll-In, Locate & Match

Washington Recognizes Need for Retirement Plan Portability Solutions – Part 2

Posted by Neal Ringquist on Jul 20, 2017 1:00:53 PM

In January 2016, this blog published a post on the November 2015 letter from Senator Patty Murray (D–WA) of the Senate HELP committee, signed by a bicameral group of Congressional members, urging then Department of Labor (DOL) Secretary Thomas Perez to encourage the DOL’s Employee Benefits Security Administration to issue guidance on auto portability.

To demonstrate the bipartisan resolve to plug cash out leakage in the retirement system through auto portability, Senator Tim Scott (R-SC) published a similar letter this week, sent to current Labor Secretary Alexander Acosta, and co-signed by 10 Republican Senators, urging similar guidance on auto portability.


For this letter, Senator Scott also received the backing of a number of retirement-focused trade organizations, including the American Benefits Council, Financial Services Roundtable, Investment Company Institute, Insured Retirement Institute, Securities Industry and Financial Markets Association, U.S. Chamber of Commerce, Defined Contribution Institutional Investor Association (DCIIA), and the Society of Professional Asset Managers & Recordkeepers (SPARK). 

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Topics: Auto Portability, Cash Outs, America's Mobile Workforce, 401k leakage

Cybersecurity Meets Retirement Security

Posted by Mike Goode on Jul 10, 2017 3:13:41 PM


Everyone, it seems, is concerned about cybersecurity these days, and with good reason. Each week seems to bring a new round of headlines, making it clear that identity theft and criminal cyber activity have become persistent features of our lives. 


The victims of cyber-crime can be wide-ranging, including governments, industry sectors, corporations of all sizes and individuals. The sources of cyber threats are equally diverse, originating from rogue nation-states, crime cartels, “lone wolf” hackers and even disgruntled employees.


As individuals, we know how important it is to protect our privacy. If we haven’t personally been the victim of identity theft or had sensitive data exposed in a major corporate data breach, the odds are that someone close to us has. 


Institutions at all levels who are threatened by cyber-crime devote significant resources to hardening and continually evaluating their security. For example, it’s now common practice to employ “white-hat” hackers who perform penetration testing to identify vulnerabilities so they can be fixed before being exploited by the “black-hats” or bad guys. The lessons learned from these exercises are invaluable and help institutions enhance the security of their information systems.


Cybersecurity in the Retirement Services Industry

With trillions of dollars in assets to safeguard, the retirement services industry is now intensely focused on the issue of cybersecurity. It’s a challenge, because retirement savings plans will likely use and share their data with multiple third parties, including recordkeepers, third party administrators, asset managers, advisors and other providers – all of whom may have access to sensitive participant, beneficiary and employer information. 


Recently, the Department of Labor’s ERISA Advisory Council, as well as other industry organizations such as SPARK, have begun to provide leadership in establishing cyber security standards for workplace benefits plans.


Cyber Safety Tips for Retirement Plan Participants

What can retirement plan participants do to protect their retirement savings? 


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Topics: Security

Rising Healthcare Costs Necessitate Healthy Retirement-Saving Habits

Posted by Spencer Williams on Jul 5, 2017 2:34:46 PM


If you think of retirement savings as a key part of a healthy retirement, then anyone who has prematurely cashed out 401(k) savings during their working life has suffered a compound fracture that will require several stages of therapy to fully rehabilitate. But a cash-out isn’t the only impediment to a financially secure retirement for these hardworking Americans.


According to Bank of America Merrill Lynch’s 2017 Workplace Benefits Report, 79% of employees experienced an increase in healthcare costs last year, leading 63% of women and 62% of men to decrease their retirement-savings contributions.


With rising healthcare costs undermining many Americans’ financial wellness, eradicating cash-out leakage and preserving savings by eliminating friction within the U.S. retirement system—the root cause of cash-out leakage—are more important than ever for helping Americans save as much for retirement as possible.

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Topics: EBN, Auto Portability, 401(k) Consolidation, Retirement Plan Portability, Retirement Savings Portability

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