TRANSCRIPT:
Tom Hawkins: Welcome to another edition of the RCH Consolidation Corner Channel, where we provide you with audio content that explores key issues in the preservation and consolidation of retirement savings. In this episode, we examine the topic of unresponsive participants in retirement plans. We hope you’ll find the audio enjoyable and informative.
NARRATOR:
Today, we’ll take on a challenge in retirement plans that doesn’t get enough attention - unresponsive participants.
When we think about problems in this space, we usually hear about missing participants – people who’ve moved and whose contact information is out of date. But unresponsive participants are different. We can reach them, but they simply don’t reply or take action. And for plan sponsors, that creates a unique headache - not tracking them down but getting them engaged.
So, how big is this issue? Well, the Department of Labor estimates that around 15 million dollars in retirement checks go unclaimed every year. Based on data that we have, we think that this estimate is low. That’s because, in one very large plan, covering a quarter of a million participants, more than ten percent of small distribution checks never got cashed. And a government study showed that over a single decade, 25 million workers left at least one retirement account behind when they changed jobs. Clearly, this is not just an exception… it’s a widespread problem.
Now let’s talk about why people don’t respond. There are six key reasons:
- First, the process itself is outdated – think about checks in the mail that never get deposited.
- Second, small balances – if the account is under a thousand dollars, many people simply don’t bother.
- Third, lack of awareness – a lot of folks don’t even realize they still have money in a former employer’s plan.
- Fourth, procrastination – people mean to act… but never quite get around to it.
- Fifth, skepticism – with so much financial fraud today, some just don’t trust messages asking them to take action.
- And finally, diminished capacity – health or cognitive issues can prevent someone from handling their accounts.
So what can plan sponsors do? They can:
- Keep records fresh with regular updates.
- Step up outreach when needed — through phone calls or certified mail.
- Make communications clear and trustworthy: say who you are, what action is required, and why it matters.
- Document every effort — regulators expect that.
- Use automatic rollovers for balances under a thousand dollars, instead of sending checks that may sit uncashed.
- And finally, take advantage of auto portability, which automatically moves small accounts over to a worker’s new plan when they change jobs.
At the end of the day, reducing unresponsiveness helps everyone. Plan sponsors lower regulatory risks and participants actually receive the benefits they’ve earned.
That’s the goal — and the opportunity.
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