Consolidation Corner

In Search Of: Guidance for Locating Missing Participants

Posted by Thomas Hawkins on Oct 25, 2017 2:33:48 PM

Two weeks ago, I authored an article applauding the American Benefits Council for their October 2nd, 2017 letter to the Department of Labor (DOL), which clearly identified the root causes of missing participants: a highly-mobile workforce and a lack of retirement savings portability. Extending the Council’s insight, I maintained that what’s really “missing” in our defined contribution system are initiatives that move retirement savings forward when participants change jobs, such as auto portability. When implemented, these initiatives could serve to dramatically decrease the overall incidence of missing participants.


Meanwhile, as a practical matter, fiduciaries of ongoing plans must still confront the problem of locating missing participants, and must do so with incomplete guidance. If audited, they’ll potentially face “ad hoc” enforcement positions by the DOL, which the Council asserts have been inconsistent and, in many cases, unreasonable.


This article focuses on the Council’s specific recommendations to the DOL as set forth in their letter. The Council’s recommendations, if adopted, could establish a more complete, consistent and reasonable framework for plans to address the missing participant problem, going forward.


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Topics: Auto Portability, Automatic Rollovers, 401(k) Consolidation, In-Plan Consolidation, America's Mobile Workforce, Auto Enrollment, Retirement Plan Portability, Automatic Rollover, Missing Participant IRA

Bringing Clarity to the Murky Problem of Missing Participants

Posted by Thomas Hawkins on Oct 13, 2017 4:02:45 PM


On October 2
nd, 2017, the American Benefits Council delivered a letter to the Department of Labor (DoL), urging the DoL to act on the problem of unresponsive or missing participants, an issue that has proven to be a significant point-of-pain for plan sponsors.


The central focus of the Council’s letter is the need for comprehensive and consistent guidance for plan sponsors in locating missing participants, a critical process that’s necessary to satisfy the DoL’s goal of ensuring that all participants receive their retirement benefits. 


In seeking clarity and consistency, the Council seems to have hit their mark, laying out a series of recommendations for an adaptive framework, based on the lifecycle of terminated, vested employees that includes the periods before, just prior to, and following distribution events.  


If adopted, the recommendations would supply desperately needed direction to fiduciaries of ongoing retirement plans, as well as providing a predictable framework for the DoL’s enforcement actions.


What’s Missing: A Strategic Solution for Missing Participants


As importantly, a careful read of the letter indicates the Council also grasps the larger dynamics of the missing participant problem, correctly identifying its underlying root causes. 

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Topics: Auto Portability, Automatic Rollovers, 401(k) Consolidation, In-Plan Consolidation, Cash Outs, Leakage, America's Mobile Workforce, Auto Enrollment, Retirement Plan Portability, Automatic Rollover, PSCA, Stale Dated Checks, 401k leakage, EBRI

The Explosion of Small 401(k) Accounts

Posted by Thomas Hawkins on Sep 18, 2017 4:28:54 PM


It’s generally accepted that the small-balance accounts of terminated 401(k) plan participants have been a problem for plan sponsors, resulting in increased plan costs, fiduciary risk and other ancillary problems, such as missing participants and uncashed distribution checks.

Now, based on new information from EBRI and other sources, we’re learning that small accounts are a large and growing problem for active participants as well.

If no action is taken to make retirement savings more portable, an increasingly mobile workforce will ensure that this collective “explosion” in small accounts will exacerbate headaches for plan sponsors. For participants with small accounts, research indicates that bad outcomes will only worsen as they leave savings behind or cash out entirely.

Looking Back: The Impact of Public Policy on Small Accounts

The problem of small accounts -- for both terminated and active participants – didn’t happen overnight, and has been influenced over many years by public policy, resulting in a decidedly mixed bag of outcomes. 

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Topics: Auto Portability, Automatic Rollovers, 401(k) Consolidation, In-Plan Consolidation, Cash Outs, Leakage, America's Mobile Workforce, Auto Enrollment, Retirement Plan Portability, Automatic Rollover, PSCA, Stale Dated Checks, 401k leakage, EBRI

Don’t Wait Until It’s Too Late: Prepare Now for Year-End 401(k) Plan Terminations

Posted by Thomas Hawkins on Sep 6, 2017 9:45:08 AM

As we enter the 4th quarter of 2017, many plan sponsors (as well as their advisors) will face the prospect of terminating a 401(k) plan.  For most, this will be the first -- and only -- time that they’ll undertake this important initiative, typically without the benefit of prior experience.

Unfortunately, many sponsors in this position will realize too late that time is not on their side, and will be scrambling to perform all the steps necessary to effectively terminate their plans.


When conducted properly, a 401(k) plan termination can take up to 4 months, from start-to-finish, and will require significant planning, flawless execution and strict attention to detail.  On the other hand, a poorly-executed plan termination could result in your plan not being properly terminated, which could result in delay, additional expenses -- and even worse -- the scrutiny of a DOL or IRS audit.

To educate sponsors in understanding the basics of terminating 401(k) plans, Retirement Clearinghouse has prepared a three-part video series.

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Topics: Auto Portability, Automatic Rollover

The Cashout Clock is Still Ticking: Let’s Stop It!

Posted by Thomas Hawkins on Aug 16, 2017 3:06:24 PM



On May 12th, Retirement Clearinghouse announced the National Retirement Savings Cashout Clock, a virtual clock that calculates 2017 year-to-date cashout leakage from America’s defined contribution system in real time.


When it was announced, the Cashout Clock had already registered $24.4 billion in cashouts. 


Since then, the Cashout Clock has relentlessly advanced, adding another $16 billion to cross the $40 billion mark in late July.  As of this writing, $42.3 billion in cashouts have occurred thus far in 2017. If nothing happens to stem the flow, then we’ll reach $68 billion in cashouts by year’s end.

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Topics: Auto Portability, Automatic Rollover

A Big Step Forward for Auto Portability

Posted by Thomas Hawkins on Jul 25, 2017 12:11:50 PM

On July 11th, 2017, a small group of retirement services professionals at Retirement Clearinghouse (RCH)  successfully conducted the first-use of a new and important financial technology.  Known as “locate & match” -- the technology represents a breakthrough in the ability to automatically move small balances forward in America’s defined contribution system, and forms the backbone of RCH Auto Portability.


For the first time, auto portability is now live in America’s defined contribution system.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollover, Automatic Roll-In, Locate & Match

Why America’s Retirement Savings Needs Recycling

Posted by Thomas Hawkins on Apr 24, 2017 10:58:04 AM


As we marked the 47th annual Earth Day on April 22nd, we were once again reminded of the need to protect our environment. This heightened awareness is testament to how far Americans have come in both recognizing and curbing the wasteful, destructive behaviors that emerged in the decades following World War II. Those excesses have given rise to conservation and environmentalism, and were heralded by the first Earth Day in 1970. 


Today’s Wasteful Behavior: Cash Out Leakage


While we may be more environmentally-conscious these days, we don’t apply the same principles financially. There is a highly-wasteful and harmful behavior that silently robs millions of the prospect for a comfortable or timely retirement. Every year, millions of Americans will needlessly cash out their retirement savings after changing jobs, converting these savings into wasted consumption and avoidable tax penalties.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation, National Retirement Savings Cash Out Clock

New EBRI Research Finds $2T Saved From Automated Portability

Posted by Neal Ringquist on Apr 19, 2017 8:05:00 AM

As much as $2 trillion could be retained in the U.S. retirement systems if Auto Portability were fully implemented, according to new research by the Employee Benefit Research Institute (EBRI). The research establishes Auto Portability as a leading retirement industry public policy initiative, placing it ahead of auto IRA initiatives and just behind universal DC coverage in terms of impact on total retirement savings shortfall.


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Topics: Auto Portability, 401(k) Consolidation, Auto Enrollment, Automatic Rollover

The African-American Retirement Crisis: How Auto Portability Can Help

Posted by Thomas Hawkins on Mar 30, 2017 4:11:40 PM

Today, many Americans are hard-pressed to set aside enough savings for a timely or comfortable retirement.   The factors most-often cited as driving the coming “retirement crisis” include longer life expectancies, rising healthcare costs and stagnant incomes. 


The African-American community faces these same challenges plus other economic headwinds, but with larger hurdles to overcome to secure a comfortable retirement.   Nowhere is this more apparent than in America’s defined contribution system, where African-Americans are confronted by: 

  1. Lower overall use of employer-sponsored plans. In 2013, only 41% of African-American families had retirement savings accounts, vs. 65% of white, non-Hispanic families. 
  1. Lower levels of plan enrollment and contribution rates, including:

-  68% average plan enrollment, vs. 79% for white participants

-  2% lower contribution rates, vs. white participants

  1. Unfavorable demographic, economic and work-related factors. Compared against their white counterparts, the average African-American plan participant is 14% younger, has 10% less job tenure, earns 30% lower average salary and has 28.4% higher job turnover.
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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation

The Stealth Solution to America’s Retirement Savings Crisis

Posted by Neal Ringquist on Mar 14, 2017 8:30:00 AM


Over the past year, the Department of Labor’s Fiduciary Rule has been highly-visible, presenting major ramifications for the retirement industry and looming large on the radar screens of retirement services providers.  


The underlying rationale for the rule, as stated by the Obama administration in an April 6, 2016 press briefing, was to save retirement investors $17 billion per year in lost retirement savings that result from conflicts of interest in retirement advice. Certainly, anything that protects $17 billion in retirement savings is a worthy goal, if it helps more Americans meet their retirement income needs.


However, there’s a larger hole in our retirement system – cash-out leakage – that inflicts far greater harm to American retirement savers, yet this threat continues to fly beneath our collective radar.   


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Topics: Auto Portability, Mandatory Distributions, Automatic Rollovers, 401(k) Consolidation, Cash Outs, Auto Enrollment, Automatic Rollover

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