The EBRI Policy Forum’s theme was “Retirement Policy Directions in 2017 and Beyond” and showcased the topic "Retirement Plan Portability & Public Policy" -- featuring presenters Jack VanDerhei, EBRI Research Director and Spencer Williams, Retirement Clearinghouse's President & CEO. Together, their presentations provided the latest information and research supporting retirement savings portability, including EBRI research that projects $2 trillion in benefits resulting from the adoption of full Auto Portability.
This video presentation is designed to give the viewer a basic understanding of Auto Portability.
What is Auto Portability?
Auto Portability is:
The routine, standardized and automated movement of an inactive participant’s retirement account from a former employer’s retirement plan to their active account in a new employer’s plan.
Serves the needs of participants subject to mandatory distribution provisions of their employer-sponsored plan (separated participants with account balances less than $5,000) to curb excessive cash out leakage occurring as participants change jobs.
Could be adapted to larger account balances, should public policy dictate a higher mandatory distribution limit.
This video presentation is designed to give the viewer a basic understanding of the problem of uncashed 401(k) distribution checks.
What are uncashed distribution checks, and why should I care?
Uncashed distribution checks occur when retirement plan participants fail to cash or deposit a distribution from their qualified retirement savings account, for a variety of reasons, including:
an incorrect mailing address
a lost or misplaced physical check
a distribution check that was not anticipated
as the result of inaction on the part of the participant
Uncashed distribution checks are a growing problem for plan sponsors, as the numbers of small-balance accounts and separated participants grow. For qualified plans, uncashed distribution checks can represent a fiduciary liability, since the amounts must be considered plan assets until the check is cashed or otherwise resolved. Over time, the numbers of uncashed checks can mount, along with the administrative burden and fiduciary risk.
Plans can take steps to minimize the incidence of uncashed distribution checks, as well as to resolve the situations that inevitably occur.
Leakage studies by large recordkeepers tell a consistently grim story, including cashout levels as high as 60% at job change, depending upon the balance segment.
EBRI estimates that, if cashout leakage were reduced by just one-half, we would add over $1.3 trillion in retirement savings in just over 10 years.
Fortunately, there are concrete, proven steps that plan sponsors can take that will not only reduce leakage, but can increase participants’ retirement readiness, streamline your plan and trim your administrative burden.
1. Recognize the big leakage problem: cashouts at job change Plan sponsors should understand that:
89% of leakage comes in the form of cashouts that occur post-separation1, when job-changing Americans confront a system that makes it difficult to easily transfer their retirement savings from one plan to the next.
This lack of portability means that cashing out is a huge temptation. Almost 2/3 of separated participants who cash out are doing so for reasons other than economic hardship2. Most participants who cash out will regret it later
As we enter the 4th quarter of 2016, many plan sponsors – for a variety of reasons – are faced with the prospect of a 401(k) plan termination. For most, this will be the first -- and only -- time that they’ll undertake this important project.
If you’re facing a plan termination in the 2016 calendar year, time is not on your side. A properly-conducted plan termination can take up to 2-3 months from start-to-finish, and requires significant planning, flawless execution and lots of attention to detail.
A poorly-executed plan termination could result in your plan not being properly terminated -- or worse -- you could be facing an audit.
To assist sponsors in understanding the basics about terminating 401(k) plans, Retirement Clearinghouse has prepared a free, three-part video series, immediately accessible via the links below:
With the advent of the Department of Labor's Fiduciary Rule, more employers are looking to promote lifetime plan participation and encourage participants to consolidate retirement assets in their current, active 401(k) plan. The plan feature to enable consolidation in the active 401(k) plan is the roll-in contribution. Retirement Clearinghouse is the recognized thought leader in roll-in facilitation. We have prepared this video - The ABCs of Roll-Ins -- as a resource for plan sponsors who are considering a formal roll-in program, as well as offering a roll-in facilitation service for their plan participants.
Individuals should consult their tax advisers or legal counsel for advice and information concerning their particular situation. Retirement Clearinghouse does not give legal, investment, or tax advice. IRA account fees and product information provided by Retirement Clearinghouse, LLC is subject to change without notice at the discretion of the IRA Provider. The financial institutions on the Retirement Clearinghouse marketplace provider network are solely responsible for their products and service. Securities are offered through RCH Securities, LLC, a wholly owned subsidiary of Retirement Clearinghouse, LLC and a member of FINRA (www.finra.org). Rollover Counselors with The Retirement Center are Registered Representatives of RCH Securities, LLC. RCH Shareholder Services is a wholly owned subsidiary of Retirement Clearinghouse, LLC and a registered transfer agent with the U.S. Securities and Exchange Commission.