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. Today, we’ll be exploring the magic of retirement savings consolidation and its transformative benefits to participants, to plan sponsors and to our defined contribution system. We hope you’ll find the audio enjoyable and informative.

NARRATOR: Welcome to this episode of the Consolidation Corner Channel, where we explore the transformative benefits of retirement savings consolidation. Consolidation represents a powerful strategy in the retirement savings landscape. While major corporations have long utilized consolidation for growth, this same principle offers significant advantages for individual retirement savers.

Over a decade ago, former Plan Sponsor Council of America President David Wray recognized this potential when he advocated for "consolidating the balances." Today, with auto portability initiatives becoming mainstream, his vision is becoming reality as more plan sponsors embrace consolidation.

True retirement savings consolidation means combining multiple qualified retirement accounts into one existing account. This differs significantly from simply rolling funds into a newly opened IRA. Automatic rollovers into safe harbor IRAs also don't qualify as consolidation and often trap participants in low-return accounts with excessive fees.

The benefits of proper consolidation are substantial. Research shows participants who consolidate their accounts are 50% less likely to cash out their retirement savings, regardless of balance size. This preservation of assets is crucial for long-term financial security. Consolidation also delivers immediate practical benefits by simplifying retirement planning and eliminating redundant fees.

Consider this example: participants who consolidate accounts at ages 25 and 30 could potentially accumulate an additional $18,000 by retirement age, assuming a 6.5% annual return. When retirement arrives, those with consolidated accounts also face a much simpler transition to retirement income.

From a security perspective, consolidation reduces cybersecurity risks by minimizing the number of accounts vulnerable to hackers. Fewer accounts mean a smaller target for cyber threats, protecting individuals, plan sponsors, and providers alike. Participants themselves overwhelmingly support consolidation initiatives. Multiple credible surveys confirm this preference, with one study showing 60% favor automated consolidation processes, while another found nearly 90% of respondents consider auto portability valuable.

The advantages extend beyond individual savers. Plan sponsors benefit through increased plan assets, reduced costs, and fewer missing participants. One large employer implementing a portability program saw cashouts decline by over 50%, located over 200,000 missing participants, and experienced a surge in plan roll-ins.

Consolidation strengthens the entire retirement system. Independent research consistently shows that retirement savings consolidation not only improves the existing framework but enhances the effectiveness of new policy initiatives.

With over 95% of defined contribution plans now accepting roll-ins from other plans, consolidation has never been more accessible. Facilitated roll-in services eliminate much of the complexity for participants, while auto portability makes consolidation the default for smaller accounts under $7,000 that would otherwise face a traditional automatic rollover process.

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