Blog

The problem of missing participants continues to receive a great deal of attention from plan sponsors, industry advocates, regulators and politicians.  All parties are keen to address the negative outcomes that result when job-changing 401(k) participants leave behind their accounts with former employers, relocate and fail to update their address.

Research has conclusively demonstrated that retirement savings portability dramatically reduces 401(k) cashout leakage, preserves retirement savings and reduces the incidence of missing participants. With that in mind, it’s not surprising that recent retirement public policy activities are increasingly focused on various aspects of portability.

If current trends continue, approximately 104 million women will cash out almost $800 billion in retirement savings, in today’s dollars, over the next generation.

This eye-popping statistic, presented at a “Women and Retirement Income” roundtable discussion on May 22 sponsored by the Women’s Institute for a Secure Retirement (WISER), underscores the importance of financial wellness initiatives by plan sponsors to help women participants avoid cash-outs and instead preserve their 401(k) savings in the retirement system.

Retirement Clearinghouse (RCH) has released a new video “Addressing the Problem of Missing Participants.” The video integrates new research findings from the March 2018 study “The Mobile Workforce’s Missing Participant Problem” and provides viewers with the most-complete and factual summary of the problem, including:

To readers aware of the ongoing, intense media focus on cyberattacks, it should come as no surprise that multiple studies show that the frequency and sophistication of cyberattacks is increasing, rising dramatically in 2017.

As Baby Boomers begin to retire in record numbers, they’re shifting their attention from saving for retirement to the process of decumulation, or converting their 401(k) savings into retirement income.

For many Boomers, their current-employer’s 401(k) plan wants to come to the rescue, offering them a dizzying array of retirement income solutions. Unfortunately, as these solutions begin to encounter reality, Boomers are finding that one simple, yet critical element is missing that prevents them from working as intended – the consolidation of their retirement savings.

Plan sponsors intuitively know that an explosion of small-balance 401(k) accounts held by terminated participants can create problems.  Unfortunately, few sponsors are clear on the factors that give rise to small accounts, and fewer still understand how they can utilize consolidation programs to solve the problem.

On May 22^nd, at a Women’s Institute for a Secure Retirement (WISER) roundtable addressing strategies, choices and decisions for women’s retirement income, important new data was presented that highlights the challenges faced by women in preserving their 401(k) savings when changing jobs – particularly for women with balances less than $5,000.

Much has been written recently about the preponderance of lost and missing participants. This predicament, one of the many offshoots of the problem of too many small accounts, is an urgent one for sponsors to address given reports that the Department of Labor (DOL) is focusing on their ability to locate missing participants during plan audits.

When Ben Franklin coined the adage “an ounce of prevention is worth a pound of cure” he wasn’t considering the problem of missing participants, but 401(k) plan sponsors would be wise to heed Ben’s sage advice.  

Today, plan sponsors face an explosion of missing participants, driven by the ongoing adoption of auto enrollment and increasing workforce mobility.  Their problems are further compounded by the administrative burden required to locate them, combined with a regulatory minefield that offers little guidance and is prone to taking inconsistent enforcement actions.