Consolidation Corner

New EBRI Research Finds $2T Saved From Automated Portability

Posted by Neal Ringquist on Apr 19, 2017 8:05:00 AM

As much as $2 trillion could be retained in the U.S. retirement systems if Auto Portability were fully implemented, according to new research by the Employee Benefit Research Institute (EBRI). The research establishes Auto Portability as a leading retirement industry public policy initiative, placing it ahead of auto IRA initiatives and just behind universal DC coverage in terms of impact on total retirement savings shortfall.


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Topics: Auto Portability, 401(k) Consolidation, Auto Enrollment, Automatic Rollover

The Stealth Solution to America’s Retirement Savings Crisis

Posted by Neal Ringquist on Mar 14, 2017 8:30:00 AM


Over the past year, the Department of Labor’s Fiduciary Rule has been highly-visible, presenting major ramifications for the retirement industry and looming large on the radar screens of retirement services providers.  


The underlying rationale for the rule, as stated by the Obama administration in an April 6, 2016 press briefing, was to save retirement investors $17 billion per year in lost retirement savings that result from conflicts of interest in retirement advice. Certainly, anything that protects $17 billion in retirement savings is a worthy goal, if it helps more Americans meet their retirement income needs.


However, there’s a larger hole in our retirement system – cash-out leakage – that inflicts far greater harm to American retirement savers, yet this threat continues to fly beneath our collective radar.   


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Topics: Auto Portability, Mandatory Distributions, Automatic Rollovers, 401(k) Consolidation, Cash Outs, Auto Enrollment, Automatic Rollover

Incubate Small Retirement Accounts, Don’t Throw Them Away

Posted by Neal Ringquist on Feb 16, 2017 11:30:00 AM


On February 3rd, the U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than 3 million businesses, released Securing America’s Retirement, their legislative roadmap aimed at strengthening the U.S. retirement system.


The Chamber’s goals are admirable:

“To address the needs of our nation’s shifting workforce, reduce barriers small businesses face in developing retirement plans, and make it easier for all Americans to save for their future…” 


The roadmap details policy solution proposals that Congress can act upon to achieve better retirement security for workers in the small business sector.  Improving retirement security for the small business sector is sorely-needed, as only 14% of companies with less than 100 employees – representing 34% of private sector payrolls -- offer their employees access to a retirement plan.  


In general, the majority of the Chamber’s agenda should be well-received, and appears to be well-vetted.  However, one policy proposal – increasing the mandatory cash-out limit to $10,000 – could have significant, unintended and adverse consequences for retirement security, if implemented without additional safeguards. 

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Topics: Auto Portability, Mandatory Distributions, Automatic Rollovers, 401(k) Consolidation, Cash Outs, Auto Enrollment, Automatic Rollover

How Auto Portability Will Bridge the Minority 401(k) Participation Gap

Posted by Thomas Hawkins on Dec 27, 2016 8:30:00 AM

Under-participation by minorities in America’s 401(k) system represents a significant economic disparity that requires creative, private-sector solutions.

Auto portability – an emerging plan feature that automatically moves small balance accounts forward when participants change jobs – could play a critical role in helping to bridge the participation gap.

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Topics: Auto Portability, 401(k) Consolidation, Leakage, Auto Enrollment

Auto Enrollment: The Unintended Consequences, Part II

Posted by Thomas Hawkins on Jan 4, 2016 11:35:57 AM


In his December 1, 2015 article (The unintended consequence of 401(k) auto-enrollment), RCH CEO Spencer Williams exposes the linkage between auto enrollment and lower average account balances.  Based on Form 5500 data, Williams’ analysis presents some excellent examples of industries where average balances are significantly lower in plans that have adopted auto enrollment compared to plans that haven’t. 


Expanding on Williams’ analysis a bit, could we also expect to find a link between auto enrollment and greater numbers of separated participants?  It seems plausible: auto enrollment increases plan participation levels (a good thing), and if workforce mobility remains constant, then we’d expect to see rising levels of separated participants (a not-so-good thing).


Why should that matter?  A proliferation of separated participants drives increased plan costs, leads to higher levels of cash-outs and leakage, along with more missing participants and stranded, unconsolidated accounts.  Consequently, some plans may say “no thanks” and avoid auto enrollment altogether, despite its many favorable attributes.


So we looked deeper into the data, and that’s exactly what we found in one industry that we examined.  


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Topics: Auto Portability, Automatic Rollovers, Managed Portability, Roll-In, Lifetime Plan Participation, Auto Enrollment

The checklist you need to manage multiple retirement accounts

Posted by Neal Ringquist on Dec 16, 2015 4:13:59 PM

Marketwatch Logo

In his December 16th, 2015 article in MarketWatch, RCH’s CEO Spencer Williams offers a year-end checklist for those retirement savers who’ve elected to leave qualified retirement savings accounts behind with their former employers.


Williams maintains that multi-account retirement savers must maintain a level of vigilance to ensure that they keep tabs on these accounts, including:

  1. Monitoring merger and acquisition activity, which can lead to plan consolidation and significant changes to plan features.
  2. Determining if there are any other major plan changes (ex. – new recordkeeper, new fees, new investments, etc.)
  3. Ensuring that annual reports are still being mailed & received at your present address.  These reports should be reviewed to ensure that there are no significant changes.


If the list above sounds onerous, then you should consider consolidating your old accounts into your current employer’s plan.  The all-too-common assumption that most people make – that it’s easier just to leave these accounts behind – is often false!


Read the MarketWatch article here.

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Topics: Auto Portability, MarketWatch, Cash Outs, Lifetime Plan Participation, Auto Enrollment

As 401(k) Cash Out Leakage Grows, So Does Need for Auto Portability

Posted by Neal Ringquist on Dec 15, 2015 11:32:38 AM

In his December 11th article in BenefitsPro (Addressing the Critical Problem of 401(k) Cash Outs), Nick Thornton draws much-needed attention to the magnitude of the 401(k) cash out leakage issue, due to the frictions associated with account portability when plan participants switch jobs. Thornton’s article rightly emphasizes the need for automated portability – similar to automatic enrollment and deferral increases - to effectively address the cash out problem. 


Let’s examine the leakage problem in more detail.

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Topics: Auto Portability, Cash Outs, Lifetime Plan Participation, Leakage, America's Mobile Workforce, Auto Enrollment, Boston Research Technologies

The unintended consequence of 401(k) auto-enrollment

Posted by Spencer Williams on Dec 1, 2015 4:17:03 PM


Auto enrollment, codified in law by the Pension Protection Act of 2006, was drafted with the best of intentions—to increase Americans’ retirement savings—but it has had the unintended consequence of impairing plan effectiveness. By proliferating small accounts in plans, auto enrollment has caused a decrease in average account balances throughout the U.S. retirement system. Adding to the urgency of this issue is the rising rate of auto enrollment adoption across defined contribution plans of all sizes, but particularly among larger plans.


According to Form 5500 data, defined contribution plans with auto enrollment, across all industries, have average account balances which are 7% lower than those without auto enrollment. When we look at individual industries, the impact of auto enrollment on average account balances is much more pronounced.


For example, the difference between average account balances of plans sponsored by educational service companies with and without auto enrollment is staggering—the overall average account balance for the latter is 164% higher! This trend manifests itself in varying degrees among sponsored plans in many other industries, including furniture and related product manufacturing (123%); beverage and tobacco product manufacturing (108%); securities, commercial contracts and other financial products (33%); real estate (21%) and telecommunications (21%).


Research shows that a plan’s recordkeeping and administrative fees tend to be inversely proportional to its average account balance (see previous blog post). If your plan’s average account balance is declining, you may be paying more in fees than you would if it was stable or increasing.


Portability Solutions Provide an Easy Fix



The core objective of portability is systematic account consolidation, which counterbalances the harmful side effects of auto enrollment by increasing a plan’s active participant account balances. Portability solutions reduce the many frictions associated with moving an account from one plan to the next, and have been proven to reduce leakage and the cost of maintaining multiple retirement savings accounts (see previous blog post). 


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Topics: EBN, Auto Portability, Auto Enrollment

Enhance Auto Enrollment with Auto Portability

Posted by Spencer Williams on May 15, 2015 1:39:00 PM


The Pension Protection Act of 2006 created a safe harbor for retirement plan sponsors to automatically enroll employees in their plans. This provision was designed to help plan sponsors and participants over the long term, and it has—but it also unintentionally fueled a surge in small accounts, hurting both constituencies.


The surge of small accounts is the result of a perfect storm—increasing rates of adoption for auto enrollment combined with the high frequency of job changes observed in today’s mobile workforce. By 2009, only three years after the legislation was signed into law, defined contribution plans were saddled with an estimated 38 million inactive, stranded participant accounts, according to Cerulli Associates. Furthermore, the Employee Benefit Research Institute (EBRI) found that in 2012, approximately 40% of all retirement account balances were below $10,000. As sponsors know all too well, the incidence of many small, stranded accounts increases administrative costs while reducing their plans’ average account balances and other plan performance metrics.


The Solution: Adopting Auto Portability to Complement Auto Enrollment


The automated two-way flow of assets enables “auto portability,” whereby participants can have their retirement savings account balances systematically and automatically moved to their new employers’ plans when they change jobs.


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Topics: EBN, Auto Portability, Auto Enrollment

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