Consolidation Corner

LIMRA's Secure Retirement Institute Features Auto Portability Research

Posted by Thomas Johnson on Jan 18, 2017 5:31:32 PM



This January, LIMRA’s Secure Retirement Institute is promoting their research on Auto Portability, which contains an impressive array of information.


Entitled “DConversations – Automatic Portability: A New Approach to Addressing Retirement Plan Leakage” – the research includes:

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Topics: Auto Portability, Roll-In, Leakage, LIMRA

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

Preventing retirement plan leakage: An infrastructure project that saves trillions

Posted by Thomas Hawkins on Nov 30, 2016 10:08:25 AM

The recent U.S. Presidential election brought renewed focus upon large infrastructure projects: massive, capital-intensive efforts required to rebuild America’s roads, bridges, railways and airports. Desperately needed, these projects could cost taxpayers hundreds of billions, perhaps even trillions of dollars. 

However, there’s another vitally-needed, national infrastructure project that has negligible cost – but could generate trillions in savings, placed directly into the pockets of hard-working Americans. Finally, it can be delivered by the private sector, at no cost to American taxpayers. 

Sound too good to be true?  It’s not.


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Topics: 401(k) Consolidation, Cash Outs, Leakage, BenefitsPro

Auto Portability Simulation Model Unveiled at 78th EBRI Policy Forum

Posted by Thomas Hawkins on May 20, 2016 2:51:40 PM






On May 12th, Retirement Clearinghouse President & CEO J. Spencer Williams unveiled the Auto Portability Simulation (APS) at the Employee Benefit Research Institute's 78th Policy Forum. The APS was developed by Retirement Clearinghouse in conjunction with Dr. Ricki Ingalls, Chair of Computer Information Systems at Texas State University, and Principal at Diamond Head Associates, Inc.


The APS is a discrete event simulation, the first-of-its-kind in the retirement industry.  It shows two scenarios -- the first scenario models current practices, while the second models auto portability -- demonstrating the improved outcomes that will occur when millions of job-changing Americans with defined contribution plan balances less than $5,000 experience true plan-to-plan portability. 


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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, Leakage, Retirement Plan Portability, Video

For Earth Day: Consider How "Recycling" Could Apply to Our Retirement System

Posted by Thomas Hawkins on Apr 22, 2016 8:00:00 AM

As we observe the 46th annual Earth Day this April 22nd, we appreciate the awareness that this event has brought to the need to protect our environment, the urgency that it’s instilled in all of us, and the tangible results that have been achieved in so many important areas. Although we have much work to do, we’ve clearly come a long way since the “throwaway” culture that emerged following World War II.

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Topics: Auto Portability, 401(k) Consolidation, Cash Outs, Leakage, Retirement Savings Portability

Five Common Misconceptions About Automatic Rollovers

Posted by Thomas Hawkins on Apr 21, 2016 10:05:22 AM


Automatic rollover programs allow plan sponsors to force out of their plan separated participants with balances less than $5,000 into a Safe Harbor IRA.  These programs can be quite effective at helping sponsors resolve many of the problems associated with housing small-balance accounts in-plan, such as: 

  • Higher levels of missing participants
  • Increased administrative costs and workload
  • Higher recordkeeping fees
  • Lower average account balances 

While the benefits are well-known, there are some common misconceptions about automatic rollovers.  To ensure that plan sponsors can adequately fulfill their fiduciary responsibility to participants, we’ve identified the five most important misconceptions that are important for sponsors to understand and avoid.


Misconception #1:  It’s best to cash out participants with balances less than $1,000

Often times, plan sponsors believe that they should automatically distribute (cash out) separated participants with balances less than $1,000.  After all, it’s quick & easy, it’s allowed, and those participants would likely have cashed out anyhow.  Right?   Not so fast. 


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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, Leakage, Retirement Plan Portability, Uncashed Check Services, Stale Dated Checks

The Fiduciary Rule and Participant Transition Management

Posted by Neal Ringquist on Mar 30, 2016 2:59:37 PM



Any day now, the Department of Labor will issue the final version of the long-awaited “Fiduciary Rule” which will redefine the term “fiduciary” under ERISA.  Much has been written about the impact on advisors and broker-dealers, given their service models to retirement plans.  


Another side of the retirement market could see big changes: the handling of distributions for job-changing participants.  While a qualified plan distribution might seem like an administrative task, it’s actually a critical transition point, where plan sponsors must carefully consider the information, guidance and assistance that their participants receive, ensuring that it’s both complete and conflict-free.


How the Definition of Investment Advice Will Change


Under the current rules, the DOL uses a five-part test to determine whether a service provider is providing “investment advice” and thus acting in a fiduciary capacity.  For the advice to be considered investment advice, the following 5 conditions must be met:


  1. Advice is given as to the value of an investment or the wisdom of purchasing an investment.
  2. The advice is delivered on a regular basis, and is
  3. pursuant to a mutual agreement between the advisor and advisee.
  4. The advice is individualized, and
  5. serves as the primary basis for investment decisions.


Under the proposed rule, the five-part test is replaced by a two-part test where the following conditions must be met:


  1. Advice is given as to the value of an investment or the wisdom of purchasing an investment.
  2. The service provider acknowledges their fiduciary status (mutual agreement), or the advice is individualized and for consideration in investment decision-making.


Notably absent from the new two-part test is the requirement that the advice be given on an ongoing basis.  This has called into question whether one-time “guidance” or assistance given to participants when they change jobs would be considered fiduciary investment advice, under the new rule.

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Topics: Auto Portability, 401(k) Consolidation, Managed Portability, Roll-In, In-Plan Consolidation, Cash Outs, Leakage

Why Recycling Is Coming to the American Retirement Industry

Posted by Thomas Hawkins on Mar 15, 2016 10:30:00 AM


When trying to shape our future, it’s often helpful to understand our past.


Perhaps you’re familiar with the essential elements of the American recycling story:

  • Following World War II, Americans saw the rise of a “throwaway” society – consuming, discarding and squandering untold amounts of national treasure.
  • Gradually, an awakening occurred as Americans realized there was a better way. Instead of discarding these resources, we began to see the obvious benefits of conserving them.
  • Driven by the spirit of innovation and collaboration, new models of recycling emerged, and these models were gradually but steadily adopted by pioneering individuals and businesses.
  • Recycling spread to become a grass roots phenomenon, deeply-ingrained into our individual psyche, as well as becoming a core component of corporate social responsibility.  
  • The old “throwaway” behaviors soon died, to be replaced by new, more socially-responsible ones.


Today, no one questions the merits of recycling. We simply do it because we know it’s the right thing to do. In fact, to do otherwise could subject ourselves (and our corporations) to ridicule, harsh judgement or worse, punishment.


America’s Modern “Throwaway” – Retirement Savings


Today, America’s retirement sector – as collectively represented by our plan sponsors, their participants and providers – is complicit in a massive waste scheme in the form of forced cash outs of small balances from retirement plans. Even more harmful, the industry turns a blind eye toward voluntary retirement cash outs of large balances by participants.

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Topics: Auto Portability, Managed Portability, Cash Outs, Leakage, Retirement Savings Portability

Washington Recognizes Need for Retirement Plan Portability Solutions

Posted by Neal Ringquist on Jan 13, 2016 4:08:47 PM


Clearly, Washington DC is now “getting it” when it comes to retirement plan portability. 


In November 2015, Senator Patty Murray and other influential members of Congress delivered a letter to Department of Labor Secretary Perez urging action on Auto Portability.   Now, we have strong comments from President Obama in his final State Of The Union address on the need for more portable retirement savings.


It seems that Washington now clearly understands the frictions associated with retirement savings under the current retirement system.  They further realize that Auto Portability – a private sector solution – can plug leakage (cash outs and unnecessary fees), allowing retirement savings to move forward along with a mobile workforce, while promoting lifetime participation in retirement plans.


The Building Momentum for Retirement Plan Portability


The momentum towards portability has been steadily building.   In 2009, the U.S. Government Accountability Office (GAO) published 401(k) Plans: Policy Changes Could Reduce the Long-term Effects of Leakage on Worker’s Retirement Savings  which highlighted, perhaps for the first time, the devastating impact of cash out leakage on the retirement readiness of 401(k) plan participants.  Subsequent research reports published by Aon Hewitt, Vanguard and Fidelity were all consistent with the findings in the GAO report.  


Most recently, a Retirement Clearinghouse/Boston Research Technologies Mobile Workforce study completed in 2015 examined the distribution decisions of 401(k) plan participants, firmly establishing the linkage between frictions associated with retirement account portability and adverse participant behavior upon job change, such as cash outs and stranded accounts. 

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Topics: Auto Portability, Leakage, America's Mobile Workforce, Retirement Plan Portability

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

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