401(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!

The problem of missing participants in employer-sponsored retirement plans is one of the most important, yet perplexing issues facing plan sponsors, and for good reason.

Ensuring that participants (or their beneficiaries) receive their benefits is the essence of an employer’s fiduciary responsibility – and missing or unresponsive participants who become separated from those benefits can generate significant risks for plan fiduciaries.

On 1/26/21, Retirement Clearinghouse (RCH) released a study that advances the art and science of locating missing 401(k) plan participants. The study – Improving the Effectiveness of Electronic Missing Participant Searches – comes on the heels of U.S. Department of Labor (DOL) guidance on the topic and is highly-useful for plan sponsors who utilize electronic searches, or “e-Searches” as they are referenced in the study.

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.

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.

Sponsors of active retirement plans are increasingly challenged by the problem of missing participants, and the difficulties they face in performing diligent searches.  After all, ensuring that plan participants (or their beneficiaries) receive the benefits they’re owed is a sponsor’s primary fiduciary responsibility.

On Earth Day 2019, as we focus on creating a sustainable and eco-friendly environment, it's worth considering how the application of similar principles would benefit our retirement system.  America’s 401(k) system is unsustainable – urgently requiring an upgrade to effectively deliver on its intended goal – helping millions of Americans enjoy a timely and comfortable retirement.  The good news is that we're beginning to see important signs of action that could ultimately address the problem.

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.

Retirement Clearinghouse (RCH) has released a new video “Addressing the Problem of Missing Participants.” The video integrates new research findings from the March 2018 study “The Mobile Workforce’s Missing Participant Problem” and provides viewers with the most-complete and factual summary of the problem, including: