Consolidation Corner

Why America’s Retirement Savings Needs Recycling

Posted by Thomas Hawkins on Apr 24, 2017 10:58:04 AM

 

As we marked the 47th annual Earth Day on April 22nd, we were once again reminded of the need to protect our environment. This heightened awareness is testament to how far Americans have come in both recognizing and curbing the wasteful, destructive behaviors that emerged in the decades following World War II. Those excesses have given rise to conservation and environmentalism, and were heralded by the first Earth Day in 1970. 

 

Today’s Wasteful Behavior: Cash Out Leakage

 

While we may be more environmentally-conscious these days, we don’t apply the same principles financially. There is a highly-wasteful and harmful behavior that silently robs millions of the prospect for a comfortable or timely retirement. Every year, millions of Americans will needlessly cash out their retirement savings after changing jobs, converting these savings into wasted consumption and avoidable tax penalties.


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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation, National Retirement Savings Cash Out Clock

The African-American Retirement Crisis: How Auto Portability Can Help

Posted by Thomas Hawkins on Mar 30, 2017 4:11:40 PM


Today, many Americans are hard-pressed to set aside enough savings for a timely or comfortable retirement.   The factors most-often cited as driving the coming “retirement crisis” include longer life expectancies, rising healthcare costs and stagnant incomes. 

 

The African-American community faces these same challenges plus other economic headwinds, but with larger hurdles to overcome to secure a comfortable retirement.   Nowhere is this more apparent than in America’s defined contribution system, where African-Americans are confronted by: 

  1. Lower overall use of employer-sponsored plans. In 2013, only 41% of African-American families had retirement savings accounts, vs. 65% of white, non-Hispanic families. 
  1. Lower levels of plan enrollment and contribution rates, including:

-  68% average plan enrollment, vs. 79% for white participants

-  2% lower contribution rates, vs. white participants

  1. Unfavorable demographic, economic and work-related factors. Compared against their white counterparts, the average African-American plan participant is 14% younger, has 10% less job tenure, earns 30% lower average salary and has 28.4% higher job turnover.
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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation

Big Changes Coming for Small 401(k) Accounts

Posted by Thomas Hawkins on Feb 27, 2017 10:27:59 AM

 

The pace of change in today’s world is faster than ever -- and accelerating.  Consider the vast change witnessed by today’s centenarians over the course of their lives – moving from the horse-and-buggy to aviation, moon landings, the Internet and smartphones.

 

However, changes to America’s retirement system seem to unfold more slowly – sometimes moving at “the speed of retirement” – a glacial process driven by the moribund pace of legislation, further establishment of rules by regulatory agencies, the delivery of new features by service providers, eventual adoption by the plan sponsor community, and finally – by the individual actions of participants over the course of their working lives. 

 

Even truly transformative change, such as automatic enrollment and default investments such as target-date funds, took years to germinate before legislative action, in the form of the Pension Protection Act, provided the clarity that gave their adoption a needed jump start.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Boston Research Technologies, Automatic Rollover, auto portability simulation

Why Small Balance Cash Outs Are Falling Through the Cracks

Posted by Neal Ringquist on Aug 9, 2016 11:00:00 AM

According to the recently released 2016 Willis Towers Watson U.S. Retirement Governance Survey, a major trend in retirement plan governance is the growing concern employers have for employees’ retirement benefit adequacy and financial well-being. To address this concern, sponsors indicated plans to increase monitoring of participant behaviors, using metrics such as plan participation and contribution rates, as well as carefully tracking the performance of their plans’ investment managers.

Oddly, concern over participant cash outs – certainly the most destructive behavior that participants can undertake – doesn’t make the list, despite persistent evidence that cash outs are at epidemic levels, particularly for balances under $5,000.

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Topics: Auto Portability, Mandatory Distributions, Safe Harbor IRA, Automatic Rollovers, Cash Outs, Retirement Plan Portability, Retirement Savings Portability

When it Comes to Saving for Retirement, Millennials Can Learn from Baby Boomers’ Mistakes

Posted by Neal Ringquist on Jul 1, 2016 8:30:00 AM

In his 6/30/16 MarketWatch article, RCH President and CEO Spencer Williams suggests an inter-generational dialogue on the pitfalls to avoid when saving for retirement.

 

As the generation whose career has witnessed the emergence and widespread adoption of 401(k) plans, Boomers are uniquely qualified to lend their perspective to Millennials. As Boomers have changed jobs, the specter of the cashing out has loomed largest in their list of regrets.

 

Sadly, the cashout leakage problem could have been solved by simply providing Boomers with an easier alternative to move their balances forward to their current-employer plans, as they changed jobs.   The good news for Millennials is that the problem of portability friction is being taken up in Washington, DC – including by the White House, a bicameral group of Congress members, as well as the Bipartisan Policy Center. All of these calls share one thing in common: making it easier for current and future generations to move their retirement savings forward at the time of job transition, thus avoiding the scourge of cash outs.

 

Williams cites results from the Auto Portability Simulation (APS) model that show $115 billion in new retirement savings would be added to the nation’s retirement system, if we only added portability to the equation. And that’s just for savers with less than $5,000!

 

Millennials can ensure they don’t wind up regretting their actions by learning from the mistakes of their elders, and avoiding the temptation to cash out or leave their accounts behind when changing jobs.   Solutions like Auto Portability can make that choice a lot easier – not only for Millennials, but for every generation.

 

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Topics: Auto Portability, MarketWatch, Safe Harbor IRA, Automatic Rollovers, Cash Outs, Retirement Plan Portability, Retirement Savings Portability

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

Say What? The Arcane Lingo of Retirement Savings Portability

Posted by Thomas Hawkins on Apr 28, 2016 10:30:00 AM


 

In virtually any area of specialty, a unique jargon evolves that’s highly-specific to that field.  To insiders using the lingo every day, it seems familiar and perfectly normal.  To outside observers, it can feel like a foreign language -- with words, terms and acronyms that make no sense.  

 

That’s particularly true in the highly-specialized realm in which we (Retirement Clearinghouse) exist:  the land of retirement savings portability.  This article provides you with an orientation to terms that you may not be aware of, but terms that are becoming more-and-more common and noteworthy, as elements of retirement savings portability take hold.

 

The Rise of “Automatic Rollover” and Related Terms

 

The story begins in 2001.  In that year, the 107th Congress of the United States passed EGTRRA, otherwise known as the Economic Growth Tax Relief Reconciliation Act.  EGTRRA set forth rules dictating that employer-sponsored, qualified plans could make automatic distributions to terminated employees without their consent for small balances (less than $5,000), provided that balances between $1,000 and $5,000 be automatically rolled over to an IRA. 

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Retirement Plan Portability, Retirement Savings Portability, Automatic Rollover

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

DC Plan Termination Video Series Part 3: Five Criteria for Selecting a Services Provider

Posted by Michael Wilder on Feb 25, 2016 10:30:00 AM

Retirement Clearinghouse (RCH) is pleased to offer a three-part series of educational videos on plan terminations, presented by Mike Wilder, RCH’s Vice President of Client Services. These videos are intended to provide plan sponsors with a basic understanding of key plan termination process steps, the common mistakes that are made by plan sponsors, and the key criteria for selecting a plan termination services provider. We hope you’ll find these videos interesting & informative!    

 

 
 
 
 
 
 
 

 

 

DC Plan Termination - Five Criteria for Selecting a Services Provider

Terminating a retirement plan takes a lot of work, a lot of planning and requires specialized skills.  Not surprisingly, most fiduciaries choose to outsource plan terminations to service providers.

Selecting an outsourced provider is a critical decision. To help simplify the process we suggest using the five criteria below.

 

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Topics: Safe Harbor IRA, Automatic Rollovers, How-To, Plan Termination

DC Plan Termination Video Series Part 2: Common Mistakes Plan Sponsors Make

Posted by Michael Wilder on Feb 19, 2016 12:57:09 PM

Retirement Clearinghouse (RCH) is pleased to offer a three-part series of educational videos on plan terminations, presented by Mike Wilder, RCH’s Vice President of Client Services. These videos are intended to provide plan sponsors with a basic understanding of key plan termination process steps, the common mistakes that are made by plan sponsors, and the key criteria for selecting a plan termination services provider. We hope you’ll find these videos interesting & informative! 

 

For more information, contact a Retirement Clearinghouse sales representative at sales@RCH1.com, or call us at (866) 827-9608.


 

 
 
 
 
 
 
 
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DC Plan Termination - Common Mistakes Plan Sponsors Make

 

Terminating a retirement plan is complicated. The importance of having a well thought out plan in place before beginning the plan termination process is imperative, because making mistakes can be costly. To better understand why plan sponsors were making mistakes in qualified plan terminations the IRS Employee Plans Compliance Unit conducted a “Termination Project” in 2011. Over 75% of the sampled sponsors made errors!

 

 

So what kind of errors did plan sponsors make?

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Topics: Safe Harbor IRA, Automatic Rollovers, How-To, Plan Termination, Common Mistakes

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