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401k roll-in blog posts
As Time Passes, The Gains Become Harder
RCH's Tom Hawkins, writing in the Consolidation Corner blog, observes that our nearly 45 year-old defined contribution system may face diminishing returns as it tries to generate future growth, and should focus on quality and efficiency as it simultaneously expands access. Using fitness as an analogy, Hawkins offers a "workout plan" for the DC system, including plugging leakage through increased portability and emergency savings, while fostering increased retirement savings consolidation to avoid an explosion in small accounts. When combined with expanded access initiatives, these measures can dramatically increase Americans' retirement security, over and above expanding access alone.
Dialing Up the Intensity of Missing Participant Searches
Writing in RCH’s Consolidation Corner blog, Tom Hawkins helps plan sponsors understand how and when they should increase the intensity of their missing participant searches. When it comes to locating missing retirement plan participants, Hawkins notes that “there’s no substitute for an effective electronic, or ‘e-search.’ However, retirement plan sponsors will inevitably encounter scenarios where periodic e-searches alone will not suffice.” Hawkins provides plan sponsors with six actionable steps to increase search intensity and offers tips on how to minimize the cost & effort associated with missing participants.
Why Missing Participants Are So Misunderstood
Writing in the Consolidation Corner blog, RCH's Tom Hawkins examines the topic of missing participants, which he states: "is a problem that’s ill-defined and poorly understood, and where fundamental misunderstandings exist, inadequate solutions – paired with the prospect of unwanted regulatory attention or audits – can follow." Hawkins asserts that "taking proactive steps to conduct searches, and turning on plan features that promote retirement savings portability are the key steps required to getting off the missing participant treadmill."
Re-Thinking the Automatic Rollover IRA
Selecting an automatic rollover IRA provider used to be easy. Most 401(k) plan sponsors simply accepted the solution offered through their recordkeeper or TPA. Others performed due diligence, using a limited set of criteria including basic fees, investment options and accountholder service. Few, however, considered the grim realities facing terminated participants forced out into safe harbor IRAs, including excessive cashouts, forgotten accounts, hidden fees, and barriers to exit. Now, it's incumbent upon plan sponsors to fundamentally “re-think” these programs, incorporating five new criteria to ensure that automatic rollover IRA programs are fiduciary-friendly, while dramatically improving participants’ retirement outcomes.
401(k) Portability in Four Movements
RCH's Tom Hawkins examines the experience of a very large (250,000+ participants) 401(k) plan sponsor that has been highly successful in delivering improved participant outcomes by incrementally adopting a full program of retirement savings portability. Looking at four distinct five-year periods that coincided with increasing levels of portability and improved participant outcomes, Hawkins writes that "there’s no finer example of those [improved] outcomes than the multi-year, real-world experience of this plan sponsor, where thousands of participants increased their prospects for a timely and comfortable retirement."
Key Portability Finding Located in EBRI’s Retirement Confidence Survey
RCH's Tom Hawkins digs into EBRI's 2022 Retirement Confidence Survey (RCS) and finds an interesting and valuable finding not referenced in the organization’s initial report, officially released to the public on Thursday, April 28th. In an excerpt of a report available to survey partners, the RCS has found that a plurality of job-changing 401(k) plan participants favor automatic plan-to-plan portability over consolidating their savings to an IRA, or to leaving their savings behind in their former employer’s plan. This result comes on the heels of EBRI’s 2021 survey, which found that nearly 9 in 10 participants believed that auto portability would be valuable to them, and Hawkins believes "others -- including the Department of Labor – will find 401(k) participants’ strong preference for plan-to-plan portability compelling."
Three New Year’s Resolutions for 401(k) Plan Sponsors
As 2021 comes to a close, RCH EVP Neal Ringquist offers 401(k) plan sponsors his suggestions for three 2022 resolutions that, if acted on, could deliver significant benefits for their plans, for their participants and ultimately for the entire 401(k) ecosystem. Ringquist bases his suggestions on several pivotal events that occurred in 2021, underscoring the need to deploy true plan-to-plan portability to solve the problem of cashout leakage.
Cracking the Code to True 401(k) Portability
America’s 401(k) system, long plagued by friction, produces $92.4 billion of excessive cash-out leakage annually. In recent years and culminating in 2021, the private sector has finally “cracked the code” and is delivering innovative fintech solutions, combined with education and personal assistance to reduce friction and to enable true 401(k) portability.