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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.
Re-Securing the Highest Purpose for a Retirement Savings Lost & Found
Past proposals for an Office of the Retirement Savings Lost and Found (“Lost & Found”) offered good examples of how the federal government could serve an important, ancillary role alongside the private sector in our nation’s 401(k) system.
Three New Year's Resolutions for Plan Sponsors to Consider
In January, Alight Solutions released 2020 Hot Topics in Retirement & Financial Wellbeing, a survey of 130 plan sponsors employing 5.5 million workers and highlighting key trends among plan sponsors, including expanding financial wellbeing programs, increasing efforts to help participants bridge the gap between working and retiring, and strengthening programs to locate missing participants.
‘Sudden Money’ and Preserving 401(k) Savings Don’t Mix
Researchers realize that long-term retirement planning is not a natural act for most 401(k) plan participants. Consequently, important 401(k) plan features have evolved (ex. – auto enrollment, auto escalation, QDIA funds, etc.) to overcome the mis-match and to promote saving for retirement. Many of these features work spectacularly well – but only for as long as participants are actively participating in that plan.
The Tragicomedy of Cashout Leakage
I often write about the phenomenon of cashout leakage, which occurs when participants change jobs and prematurely withdraw their retirement savings, prior to normal retirement age.
Let’s Extend the Spirit of the CARES Act to Automatic Rollover IRAs
America is a fundamentally caring country, as reflected in the collective actions of its individuals, businesses and policymakers. In the midst of the COVID-19 crisis, no policy reflects this caring spirit more than the aptly-named CARES Act, which, among other things, temporarily allows retirement savers hard-hit by the COVID-19 crisis to tap their qualified retirement savings while avoiding the punitive, 10% early-withdrawal penalty.
How Does Auto Portability Work? Watch the Video.
Looking for a quick primer on how auto portability works? Watch the video below, which walks you through the four-step process, including:
1. Worker changes jobs
2. Locate new worker's account
3. Match data
4. Savings follow worker
Video: Is Auto Portability the Next 401(k) ‘ESG’ Initiative?
Three recent developments indicate that the retirement industry is waking up to the need to address 401(k) cashout leakage, and importantly – from within the framework of corporate social responsibility.
How Socially Responsible Corporations Will Solve the 401(k) Cashout Crisis
Every year a silent, slow-motion train wreck occurs in America’s 401(k) system, when millions of job-changing workers prematurely cash out billions of dollars in retirement savings, a phenomenon known in retirement industry lingo as “cashout leakage."
The New Age of DC Plan Portability
A recent survey of defined contribution (DC) plan sponsors found that interest in retaining assets for retirement is on the rise. That finding, paired with certain provisions of the SECURE Act of 2019, suggests that DC plans are on a path to becoming “decumulation vehicles” for American retirees. While these developments are encouraging, persistently high levels of cashout leakage, increasing missing participants and other factors produce understandable pessimism regarding the future of DC plans.
Cash-Out Leakage is Still Too High—and Auto Portability can Help
401(k) account cash-outs remain a potent threat to Americans’ retirement-readiness and by all accounts the U.S. Department of Labor agrees, having issued its final Prohibited Transaction Exemption (PTE) for auto portability at the end of July.