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Safe harbor IRA blog posts
A Blueprint for Lifetime Participation in Plans
How many of us will be so fortunate as to participate in an employer-sponsored retirement plan every day of our working careers? Or, for an even more uncommon scenario, how many of us will work for the same company for 30 or 40 years? Yet, as has been amply established by the Employee Benefit Research Institute (EBRI), those who can raise their hands and respond yes to either of these questions routinely show up in the top decile of savers who are well-prepared for retirement and these participants provide a clear blueprint for retirement-saving success.
One Solution to Three Costly Retirement-Saving Mistakes
In his September 2nd, 2015 MarketWatch article One Solution to Three Costly Retirement-Saving Mistakes, RCH's CEO Spencer Williams provides insight as to why a majority of Americans are not very confident in their retirement readiness. Three costly mistakes consistently plague retirement savers: 1) leaving 401(k) accounts behind when changing jobs, 2) prematurely cashing out and 3) not informing prior employers' retirement plan record-keepers about address changes.
Reducing the Burden of Missing Participants
Whenever I am meeting with a plan sponsor, TPA or recordkeeper for the first time, I ask about returned mail related to missing participants; and almost every time I get "the look" - The look and/or eye roll that instantly says that returned mail is definitely a problem. The entire retirement industry is all-too-familiar with returned mail related to missing participants. In addition to the money wasted on materials and mailing costs, missing participants create administrative burdens and increase the plan's fiduciary liability risk. So, what is a fiduciary to do?
Automatically Moving Mandatory Distributions Forward
The mandatory distribution-to-Safe Harbor IRA plan feature as commonly utilized today was conceived in 2001 and launched in 2005 with good intentions, and for valid reasons. A mobile workforce, combined with a lack of retirement savings portability, had created a burgeoning problem for plan sponsors.
Safe Harbor IRAs Are Not Always Safe
Plan sponsors can help themselves and their participants over the long term by rolling balances of $5,000 or less from inactive participants into safe harbor IRAs. However, for various reasons discussed below, many safe harbor IRAs do not live up to their name and could leave sponsors with unexpected fiduciary liability.
How to Make Mandatory Distributions More Fiduciary Friendly
Mandatory distributions from employer-sponsored plans are a creation of regulation's specifically, a section of ERISA that allows plan sponsors to distribute accounts with less than $5,000 out of a qualified plan and into a safe harbor IRA.
Reduce Plan Fees by Increasing Account Balances
Plan costs can be lowered by increasing average balances, and average balances can be increased through auto portability, says RCH President & CEO Spencer Williams.
Why Dump Mandatory Distributions in a Landfill When You Can Recycle?
Mandatory distributions of small 401(k) accounts when participants separate from service provide many benefits for plan sponsors, including lower administrative costs and higher average account balances.
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