The Department of Labor (DOL) has issued its 11/06/18 Advisory Opinion 2018-01A on Auto Portability, which can be accessed on the DOL’s website at this link.
Consolidation Corner Blog
Consolidation Corner is the Retirement Clearinghouse (RCH) blog, and features the latest articles and bylines from our executives, addressing important retirement savings portability topics.
A primary responsibility for fiduciaries is to seek out and identify the best available solutions that enable fulfillment of their responsibilities. For plan sponsors tasked with implementing and evaluating the effectiveness of their missing participant program, this can be a difficult task, particularly given the accelerating rate of technological innovation and the virtual explosion of new sources of data available online. In today’s day and age, what is considered a state-of-the-art program today could easily become obsolete tomorrow, rendering a plan’s missing-participant program vulnerable to fiduciary liability.
As we enter the 4th quarter of 2018, 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 2018 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.
Over the past few years, we’ve written extensively about auto portability -- what it is, how it works and the significant, positive impact it will have on the retirement security of working Americans. Our positions have been supported by research, predictive models (including EBRI’s RSPM) and real-world results from the initial implementation of auto portability.
In this article, we address an important retirement public policy question: How would a pairing of auto portability with open multiple employer plans (or “open MEPs”) impact the retirement savings of America’s minorities, and particularly, African-Americans?
With unemployment nearing historic lows, more career opportunity inevitably translates into greater job mobility. That means that more 401(k) participants will be changing jobs and will face important decisions on what to do with their retirement savings.
It was the best of times, it was the worst of times.
For job-changing 401(k) participants with balances greater than $15,000, it was the spring of financial wellness, as the bulk of their retirement savings would remain intact. For less-aristocratic 401(k) savers with balances below $15,000, it was the winter of despair, as most of their savings would be lost on the cashout chopping block or forcibly exiled to a safe harbor IRA, where more savings would perish.
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.