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Consolidation Corner Blog
Consolidation Corner is the Retirement Clearinghouse (RCH) blog, and features the latest articles and bylines from our executives, addressing important retirement savings portability topics.
It’s The Final Countdown for 2021 401(k) Plan Terminations
As we enter the 4th quarter of 2021, many plan sponsors – for a variety of reasons – are faced with the prospect of a 401(k) plan termination. For most, this will be the first and only time they’ll undertake this important project. In this article in RCH's Consolidation Corner blog, readers are provided access to a three-part video series featuring RCH's Mike Wilder, who instructs viewers on the essential aspects of terminating a 401(k) plan.
Beware of Second Order Effects for Retirement Savings Public Policies
RCH's Tom Hawkins examines “second order effects” that can occur with retirement savings public policies currently that would dramatically expand access to, and participation in, defined contribution plans. While the benefits are impressive, additional undesired consequences can arise that are antithetical to the policies’ original intent, including increased cashout leakage, missing participants, uncashed checks and forgotten/stranded accounts. Understanding these highly predictable second order effects, Hawkins identifies plan-to-plan portability as a means of addressing them, while significantly boosting the overall policies’ benefits.
Refundable Saver’s Tax Credits Would Significantly Reduce Retirement Savings Shortfall—Especially for Minorities
Writing in RCH's Consolidation Corner, RCH President & CEO Spencer Williams examines pending retirement savings legislation, and focuses upon the benefits of a refundable saver's credit, which would be directly deposited into taxpayers' 401(k) and IRA accounts. Taking his analysis a step further, Williams considers the infrastructure required to transfer these funds to savers, and identifies considerable synergies with the existing technology that supports auto portability.
Senate Hearing Reveals Large Employer Support for Auto Portability
RCH’s newly-appointed EVP of Public Policy, Renée Wilder Guerin finds a lot to like in the 7/28/21 Senate Finance Committee hearing, where lawmakers heard testimony on how to increase retirement savings, including tackling the longstanding problems of cashout leakage, missing participants and “forgotten” retirement savings accounts. Wilder Guerin notes that auto portability was favorably mentioned twice by Aliya Robinson (SVP, Retirement & Compensation Policy for ERIC), as a policy initiative her organization – comprised of the nation’s largest plan sponsors – supports. Coming on the heels of EBRI’s 21st Annual Retirement Confidence Survey, where nearly 9 in 10 participants indicated their preference for the feature, Senate Finance Committee testimony “bodes extremely well for auto portability’s widespread adoption, as well as the enactment of public policies that further enhance it.”
Five Misconceptions About Automatic Rollovers
Most agree -- automatic rollover programs can help retirement plan sponsors deal with many of the problems associated with small-balance accounts. Still, there are important misconceptions that persist about automatic rollovers. In this article, RCH's Tom Hawkins introduces plan sponsors to a video addressing five of the most important misconceptions, and offers constructive suggestions on how sponsors can address them.
So Happy Together: Auto Portability & Authorized Portability
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins examines the positive interplay between auto portability and its nearly-automatic cousin – which he terms “authorized” portability. Authorized portability, writes Hawkins, occurs when a safe harbor IRA account not originating from within the auto portability network is matched to an active account in a plan that’s already adopted auto portability. While the accountholder must provide their consent to consolidate the balance, a frictionless automatic roll-in results, producing a win-win-win for participants, for plan sponsors and for adopting recordkeepers.
Don’t Relegate Lost & Missing Accounts to the Lost & Found—Consolidate Them in the Retirement System
RCH’s President & CEO Spencer Williams, writing in the Consolidation Corner Blog, opines on draft provisions in SECURE 2.0 legislation that call for establishment of a “lost & found” – including housing sub-$1,000 balances for all terminating 401(k) participants. As proposed, Williams observes that simply moving sub-$1,000 balances to the PBGC does little to reduce cashouts or stranded savings and offers auto portability as a “far more constructive method” to reduce cashouts and to promote consolidation of retirement savings.
A Happy Ending for Consenting 401(k) Participants
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins examines the “happy endings” possible for 401(k) participants who give their consent for moving their balances forward to their current-employer’s plan. In the piece, Hawkins reveals new data collected from a large plan sponsor who’s implemented auto portability’s key technology components, but requires affirmative consent from participants in order to consolidate their balances. The data shows resounding success in obtaining participant consent, which augurs well for the future of auto portability and for consolidation of larger balances.
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