This One Simple Trick Radically Boosts Financial Wellness!

By Thomas Hawkins
Published on February 12, 2021

One Simple Trick401(k) Plan Sponsors: How would you like to radically boost your participants’ financial wellness, increase your plan’s assets, reduce your plan’s costs, and prevent missing participants?

Adopting this one simple and proven trick – retirement savings portability – delivers all this and more!

By promoting consolidation, retirement savings portability will not only dramatically and measurably improve your participants’ financial wellness, but its benefits will extend to your plan and beyond – including strengthening our retirement system and making practically any new retirement savings public policy initiative more effective.

The ‘Simple Trick’ of Retirement Savings Portability
Adopting a program of retirement savings portability has never been easier.

According to the latest Plan Sponsor Council of America (PSCA) Annual Survey of Profit Sharing and 401(k) Plans, 97.2% of defined contribution plans already allow roll-ins from other plans. Additionally, thanks to IRS Revenue Ruling 2014-09, plan sponsors have a simple test to validate that a roll-in contribution originates from a qualified plan, and the advent of facilitated roll-in services means that participants are spared the hassle, complexity and worry associated with “do-it-yourself” roll-ins. Finally, when it comes to small accounts, the advent of auto portability makes portability ridiculously easy for small accounts that are subject to a plan’s automatic rollover provisions.

Boosting Financial Wellness
By promoting plan-to-plan consolidation, retirement savings portability will be a boon to your employees’ financial wellness.

For starters, your 401(k) plan participants will be more than 50% less likely to cash out their retirement savings. Once their retirement savings are consolidated, they will save both time and money – enjoying greatly simplified retirement planning, while reducing the overall fees associated with maintaining multiple retirement savings accounts. Finally, when the time comes to retire, their transition to retirement income will be comparatively straightforward, vs. their unconsolidated counterparts.

Measuring the Benefits
From the plan’s perspective, the benefits of retirement savings portability will far outweigh the costs. Your plan will realize increased plan assets, lowered plan costs and a reduced incidence of small accounts and missing participants.

These outcomes have been proven at a mega plan sponsor where, in the five years following the adoption of a program of retirement savings portability:

  • Cashouts declined by over 50%, across all balance segments
  • 72,000 retirement savings accounts were consolidated
  • 207,800 missing participants were located
  • Plan roll-ins surged, with over 15% of new participants transferring assets into the plan

Accordingly, you can expect to easily track your progress through metrics such as:

  • Average account balances increased by 57%
  • Plan Roll-Ins:
    • No. of Roll-Ins
    • Assets Rolled-In
    • Average Roll-In Amount
  • Average Account Balance
  • Percentage of Terminated Participant Accounts
  • Number of Uncashed Distribution Checks
  • Number of Missing Participants

A Stronger Retirement System
By acting in the best interests of your plan and its participants, there’s also plenty of evidence that you’ll be contributing to a healthier retirement system that will yield significant societal benefits.

Independent research from the Employee Benefit Research Institute (EBRI) indicates that retirement savings portability not only strengthens the existing system but makes practically any new public policy initiative more effective.

EBRI research has found that widespread portability would:

Portability: More Than Just a Meme
Of course, click-bait internet ads pitching “one simple trick” to magically shed belly fat, eliminate debt or cure any malady are annoying. But when it comes to 401(k) plans, retirement savings portability – unlike spurious cure-alls – really delivers.

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