--- title: How to Remove 'Friction' from the 401(k) System description: To illustrate the types of situations that participants can encounter, as well as the value of a facilitated roll-in service continue reading Part 3. image: http://blog.rch1.com/hubfs/Set_Up_Images/Other_Generic_Images/front_lines.png --- [![Retirement Clearinghouse Logo](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/logo.png?width=1000&height=648&name=logo.png "Retirement Clearinghouse Logo")](https://rch1.com/) [Privacy Policy](https://securities.rch1.com/common/PrivacyStatement.pdf) [Sponsors/Service Providers](https://rch1.com/plan-sponsors) [Individuals](https://rch1.com/individuals) [Login](https://rch1.com/#) - [Home](https://rch1.com/home-page) - [Individuals](https://rch1.com/individuals) - [Individuals Home](https://rch1.com/individuals/individuals-home) - [Who is RCH?](https://rch1.com/individuals/who-is-rch) - [Why Does RCH Have My Retirement Savings?](https://rch1.com/individuals/why-does-rch-have-my-retirement-funds) - 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[Careers - Job Opportunities](https://rch1.com/company/careers) - [Our Benefits](https://rch1.com/company/our-benefits) - [The RLJ Companies](https://rch1.com/company/the-rlj-companies) - [News & Information](https://rch1.com/news) - [News](https://rch1.com/news) - [Press Releases](https://rch1.com/press-releases) - [Thought Leadership](https://rch1.com/thought-leadership) - [Consolidation Corner Blog](https://rch1.com/blog) - [Consolidation Corner Channel](https://rch1.com/consolidation-corner-channel) - [Events](https://rch1.com/events) - [Auto Portability](https://rch1.com/auto-portability) # How to Remove 'Friction' from the 401(k) System #### [By Thomas Hawkins](https://blog.rch1.com/blog/author/thomas-hawkins) | January 24, 2017 ![Tales From the Front Lines Part 3 Roll-In Retirement Finance](http://blog.rch1.com/hs-fs/hubfs/Set_Up_Images/Other_Generic_Images/front_lines.png?width=200&name=front_lines.png "Tales From the Front Lines Part 3 Roll-In Retirement Finance")In consolidated testimony before the [ERISA Advisory Council](https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/erisa-advisory-council)  on the topic of [Participant Plan Transfers and Account Consolidation for the Advancement of Lifetime Plan Participation](https://www.dol.gov/sites/default/files/ebsa/about-ebsa/about-us/erisa-advisory-council/2016-participant-plan-transfers-and-account-consolidation-scope-statement.pdf), [EBRI](http://www.ebri.org)’s [Craig Copeland](https://www.ebri.org/about/staff/craig-copeland) and [Retirement Clearinghouse](http://www.rch1.com)’s [Tom Johnson](https://www.rch1.com/corporate-profile/management-team/e-thomas-johnson-jrhead-of-policy-and-development) presented [“Auto Portability Research & Simulation: Automating Plan-to-Plan Transfers for Small Accounts”](https://www.dol.gov/sites/default/files/ebsa/about-ebsa/about-us/erisa-advisory-council/copeland-written-statement-060816.pdf) – providing the Council with the latest information & research on [Auto Portability](http://www.rch1.com/auto-portability), as well as describing the present state of plan-to-plan transfers (“roll-ins”). **Taking Out the Friction** On page 1 of their [written testimony](https://www.dol.gov/sites/default/files/ebsa/about-ebsa/about-us/erisa-advisory-council/copeland-written-statement-060816.pdf), Copeland and Johnson telegraph much of the content of their testimony by providing their audience with the quote: *“If we take the friction out, more people will stay in.”* Indeed, Auto Portability is a plan feature that will drastically reduce “friction” for the small balance (less than $5,000) job-changer, seamlessly moving their retirement savings forward, into their current-employer’s plan. The testimony is packed with the latest research that clearly documents the benefits of Auto Portability for plan sponsors and participants alike, including the results of the Auto Portability Simulation.    **Friction: Up-Close and Personal** Page 8 of their joint testimony begins to detail the barriers & obstacles to roll-ins – where, similar to earlier articles in [Consolidation Corner](https://blog.rch1.com/blog) (Tales from the Roll-In Front Lines [Part I](https://blog.rch1.com/blog/tales-from-the-roll-in-front-lines-pt-1) and [Part II](https://blog.rch1.com/blog/tales-from-the-roll-in-front-lines-pt-2)), Copeland and Johnson describe the current level of systemic dysfunction that can occur when participants attempt a [DIY roll-in](https://blog.rch1.com/blog/diy-plan-to-plan-portability-is-harder-than-you-think).  Since this portion of the EBRI / RCH testimony is derived from real-life experience with thousands of roll-in transactions, readers gain the best possible understanding of the word “friction” by confronting the formidable obstacles currently faced by participants on the roll-in “front lines. Key obstacles encountered during the distribution and contribution phases of a roll-in transaction include: The distribution process from the old plan, where the distributing institution may: - Require a personalized letter of acceptance from the receiving institution - Ask the plan administrator to sign off on distribution paperwork, including a “Medallion Signature Guarantee” along with a corporate resolution proving that the person is authorized to sign on behalf of the accepting institution. - Present participants with Transfer of Asset paperwork, a rarely-used document. - Supply overly-complex and lengthy paperwork, often more than 10 pages in length. - Discourage the roll-in or attempt to solicit an IRA or Annuity. The contribution process to the new plan, where the accepting institution may: - Require the plan administrator to personally sign-off on forms before accepting rolled-in funds. - Not be fully-aware of the documents required to complete a roll-in. - Not be sure how to interpret documents. - Discourage the roll-in or attempt to solicit an IRA or annuity. If the trail of tears described above wasn’t enough to discourage even the hardiest of participants, problems can still occur after all paperwork has been correctly completed and submitted.   Sample horror stories provided by Copeland and Johnson include: - A participant who was inadvertently cashed-out of two 401(k) plans, with taxes withheld. This error was further compounded through a reluctance to correct the transaction, followed by incorrect advice to treat the transactions as indirect rollovers. - A participant who was counseled to move the 401(k) into a traditional IRA first, then move it into a 401(k) plan. - A participant told that they could not move a Roth 401(k) balance to another Roth 401(k). Instead, the participant was told to move it to a Roth IRA, and then to a Roth 401(k), a transaction that is not permitted by the IRS. Given the frictions outlined above, participants that are determined to complete the roll-in are taking a long time to do so, or are looking for help to do it. In 2015, a [Boston Research Technologies study](https://www.rch1.com/press-releases/manual-portability-and-the-mobile-workforce) on distribution decisions made by America’s mobile workforce found that 62% of respondents indicated they required assistance with a roll-in, while 65% noted that the process took a month or longer to complete. **The Good News** If you are now troubled by the sad state of affairs with DIY roll-ins, don’t be. There are very positive developments for plan sponsors and participants interested in consolidating retirement savings: 1. Plan sponsors can engage a facilitated roll-in service provider to assist their participants with consolidating their plan balances. These services are unbiased and affordable, and the modest fees can be structured as permissible plan expenses. In addition, [research indicates](https://info.rch1.com/mobileworkforce) that participants will view this service as a valuable employee benefit. 2. Auto Portability is gaining momentum by the day, so the future looks bright for small-balance job-changers, who will see dramatically reduced cash out leakage and much higher-levels of plan-to-plan transfers. For more information, visit [RCH1.com/auto-portability](http://www.RCH1.com/auto-portability).  I predict that 2017 will be a watershed year for the delivery of true retirement savings portability, marking the beginning of the end for the friction that is so prevalent in today’s retirement system. *[ Article featured on 401KSpecialist.](https://401kspecialistmag.com/remove-friction-401k-system/)* [Back](https://blog.rch1.com/blog) [![Retirement Clearinghouse An RLJ Company](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/footer_logo.png?width=1000&height=648&name=footer_logo.png "Retirement Clearinghouse An RLJ Company")](https://rch1.com/) 1916 Ayrsley Town Boulevard Suite 200 Charlotte, NC 28273 - [Individuals](https://rch1.com/individuals) - [Plan Sponsors](https://rch1.com/plan-sponsors) - [Auto Portability](https://rch1.com/auto-portability) - [Company](https://rch1.com/company) - [News & Information](https://rch1.com/news) - [Mission](https://rch1.com/company/mission) - [Careers](https://rch1.com/company/careers) - [Contact Us](https://rch1.com/contact-us) - [Logins](https://rch1.com/#) - [Disclosure Central](https://rch1.com/individuals/learning-center/resources-%26-downloads) - [Do Not Sell or Share](https://blog.rch1.com/blog/how-to-remove-friction-from-401k-system#decline-cookies) - [My Personal Information](https://blog.rch1.com/blog/how-to-remove-friction-from-401k-system#decline-cookies) - - - Individuals should consult their tax advisers or legal counsel for advice and information concerning their particular situation. 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