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Retirement Clearinghouse in the News
Find news articles referencing RCH and our services, including RCH Auto Portability
In light of the COVID-19 crisis, RCH's Tom Hawkins examines another burden borne by millions of participants, when they’re furloughed or laid off and become subject to ‘traditional’ automatic rollover IRAs – where they’ll likely face high levels of cashouts, predatory fees and barriers to exit. Now, more than ever, it’s important for sponsors to act and to redress this burden. For sponsors utilizing traditional automatic rollover IRAs, Hawkins urges them to demonstrate their caring through three actions that will help address the problem and will deliver significant societal benefit.
Covering breaking news, P&I's Washington, DC reporter Brian Croce informs readers about the pending departure of Preston Rutledge, assistant secretary of labor for the Employee Benefits Security Administration (EBSA). With no official announcement by the DOL, Croce turns to Michael Kreps, a principal at Groom Law Group, for comment. Kreps states in an email that "Preston is a dedicated public servant, and his legacy at the department includes important work on pooled retirement plans and auto portability" with Croce adding that auto portability "has a goal of significantly reducing plan leakage and missing participants."
As participants affected by the COVID-19 crisis consider whether or not to withdraw retirement savings under provisions of the CARES Act, RCH’s Spencer Williams offers plan sponsors constructive advice for engaging them. Writing in Employee Benefit News, Williams acknowledges the need for millions to have a “financial lifeline” but suggests that sponsors remind participants via email communications and digital content “that their retirement savings should be considered a last resort for meeting emergency expenses, especially during the present crisis.”
Issue 2, 2020 of the 401k Specialist Magazine features an article by RCH's Tom Hawkins. In his piece "The New Age of 401(k) Portability", Hawkins identifies clear, across-the-board indications that America's defined contribution (DC) system is entering a "new age" of plan-to-plan portability. Portability, Hawkins contends, is the "missing ingredient" that, when added to 401(k) plans, will resolve the damaging disconnect between America's highly-mobile workforce and their immobile retirement savings.
In her 4/13/20 article in US News & World Report "Factors to Consider Before Cashing Out a 401(k)", contributor Rachel Hartman advises readers to think carefully about the long-term repercussions of prematurely cashing out of a 401(k). Hartman quotes RCH's Spencer Pringle, who suggests that participants first think carefully about whether or not the need is for a true financial emergency. If it is, Pringle further suggests that participants identify the amount required to satisfy the emergency, keeping the remaining amount invested for retirement.
Writing in PLANSPONSOR, RCH EVP Neal Ringquist urges plan sponsors to use their power to prevent participants from making huge mistakes during the COVID-19 crisis. Acknowledging that the financial effects of COVID-19 are real, and that emergency access to liquidity is absolutely necessary in financial emergencies, Ringquist argues that "short-term needs shouldn't eclipse long-term goals" and that retirement savings should only be used as a "last resort." Sadly, many participants will fall prey to temptation, and worse -- phony and misleading offers. Sponsors, writes Ringquist, can deploy "resources that educate participants on the damage cash-outs can inflict on their income in retirement." In closing, Ringquist reminds readers that, while the crisis will eventually pass, the "harm to retirement outcomes may be permanent if participants succumb to the temptation to make destructive decisions."
In an interview with 401k Specialist's Danielle Andrus, RCH President & CEO Spencer Williams urges 401(k) savers to carefully consider the long-term consequences of cashing out. Acknowledging that, in the current pandemic-fueled economic crisis "folks need access to money" Williams encourages savers to withdraw 401(k) savings only if they're faced with a "real emergency" and if so, to withdraw only what's absolutely required. Education is key, says Williams, and can "have a profound influence on participants' decision making."
Responding to the Wall Street Journal's 3/20/20 article “The Emergency 401(k) Button” with a letter to the Editor, RCH President & CEO Spencer Williams urges 401(k) savers to exercise caution when considering whether or not to cash out their savings. A hasty decision could result in "the loss of years of compound interest and investment growth that won't be there for retirement" writes Williams, citing a hypothetical 30-year-old, who cashes out $5,000, but stands to lose $52,000 in retirement earnings. Borrowing now, says Williams, is easier than borrowing in retirement, and your "70-year-old self will thank you" for your restraint.