On October 2nd, 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.
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.
Today, it’s commonly-accepted practice for retirement plan sponsors to focus on three major initiatives to promote retirement adequacy: participation, saving and diversification.
While these three initiatives are proven, an emerging best practice is for plan sponsors to expand this list, incorporating consolidation, where plan participants are encouraged to consolidate balances from former employers’ plans, using their current-employer’s plan to manage their retirement savings.
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.
It’s become widely-accepted that retirement savings portability is proven to address the small account problem for 401(k) plan sponsors, as well as preserve participants’ savings currently lost to cashout leakage.
However, the concept of retirement savings portability is relatively new. At year’s end, most plan sponsors’ attention will be focused on other plan design issues, such as auto enrollment/escalation, the lineup of investment options, enrollment, education, retirement income solutions and so forth.
In January 2016, this blog published a post on the November 2015 letter from Senator Patty Murray (D–WA) of the Senate HELP committee, signed by a bicameral group of Congressional members, urging then Department of Labor (DOL) Secretary Thomas Perez to encourage the DOL’s Employee Benefits Security Administration to issue guidance on auto portability.
In recent months, our attention has been drawn to some deserving public policy initiatives that would dramatically expand access to workplace retirement savings accounts and address the “access gap” encountered by millions of American workers who are presently offered no such option.
Auto Portability is the routine, standardized and automated movement of an inactive participant’s retirement account from a former employer’s retirement plan to their active account in a new employer’s plan. By dramatically reducing cashouts and improving retirement readiness, Auto Portability will deliver broad benefits to America’s defined contribution system, its participants and to the entire American economy.
But who benefits from Auto Portability, and how?
How Big is the 401(k) Cashout Leakage Problem? We’ve known for some years now that 401(k) cashout leakage is a very big problem, but have lacked a thorough understanding of its many dimensions.
This video presentation provides viewers with the latest data characterizing the problem of 401(k) cashout leakage, a major challenge that faces 401(k) participants when they change jobs.
Half a century ago, the global medical community united to wipe out smallpox, an infectious disease that afflicted mankind for millennia. In 1966, the World Health Organization (WHO) established the Smallpox Eradication Programme, which sent Western doctors to vaccinate the populations of nations and communities around the globe where smallpox was still rampant. No place where smallpox cases had been reported, or where the local population was not vaccinated, was overlooked by WHO medical teams, no matter how remote the village or how dangerous the journey.
On Thursday, May 11th, the Employee Benefit Research Institute (EBRI) conducted their 80th Policy Forum.