PLANSPONSOR - April - May 2022 - 32

PLAN DESIGN | LEAKAGE
Leakproof Your Plan
How to stop participants from draining their retirement savings
T
he most common triggers for retirement
plan leakage are participants
taking pre-retirement distributions,
such as cashouts, from their plan when
changing jobs; defaulting on loans; and
taking hardship withdrawals, according to
industry experts.
Asset leakage is an important issue
for plan sponsors. Retirement plans, by
growing-and staying-large, are better
positioned to negotiate with their recordkeepers
and investment providers, says
Erik Daley, managing principal in the
Multnomah Group, in Portland, Oregon.
Size grants them bargaining power to
secure institutionally priced investment
products and lower fees, he says.
Plan sponsors are also in-effect
guardians of participants' retirement prospects;
they need to ensure plan policies
promote saving and discourage untimely
withdrawals, yet still supply a safety net
for employees' true emergencies.
The extent of the leakage problem
became clear last spring in a report from
the Congressional Joint Committee on
Taxation. For " Leakage From Retirement
Savings Accounts in the U.S., " the authors
created a nationally representative panel
of individuals by examining 16 years of
tax returns, extracting over 140 million
person-year observations, for information
on retirement contributions, distributions
and transfers between accounts. " We estimate,
that, between 2003 and 2015, distributions
from [defined contribution] plans
and [individual retirement accounts] to
individuals age 50 or younger were equal
to 22% of the contributions made by this
age group, " the authors wrote.
The main reason for plan leakage,
the Joint Committee found, is cashing
out one's account when leaving a job. This
was followed by losing one's job or otherwise
suffering a negative income shock;
32 PLANSPONSOR.COM April - May 2022
Art by Alfonso De Anda

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PLANSPONSOR - April - May 2022

Table of Contents for the Digital Edition of PLANSPONSOR - April - May 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
The DE&I Lens
By Design
Things People Do
Leakproof Your Plan
The ESG Decision
When Retirees Stay in the Plan
PLANSPONSOR - April - May 2022 - Cover1
PLANSPONSOR - April - May 2022 - CT1
PLANSPONSOR - April - May 2022 - CT2
PLANSPONSOR - April - May 2022 - Cover2
PLANSPONSOR - April - May 2022 - 1
PLANSPONSOR - April - May 2022 - INSIGHTS
PLANSPONSOR - April - May 2022 - 3
PLANSPONSOR - April - May 2022 - INDUSTRY ANALYSIS
PLANSPONSOR - April - May 2022 - 5
PLANSPONSOR - April - May 2022 - RULES & REGULATIONS
PLANSPONSOR - April - May 2022 - 7
PLANSPONSOR - April - May 2022 - 8
PLANSPONSOR - April - May 2022 - 9
PLANSPONSOR - April - May 2022 - UPFRONT
PLANSPONSOR - April - May 2022 - 11
PLANSPONSOR - April - May 2022 - 12
PLANSPONSOR - April - May 2022 - 13
PLANSPONSOR - April - May 2022 - 14
PLANSPONSOR - April - May 2022 - 15
PLANSPONSOR - April - May 2022 - 16
PLANSPONSOR - April - May 2022 - 17
PLANSPONSOR - April - May 2022 - The DE&I Lens
PLANSPONSOR - April - May 2022 - 19
PLANSPONSOR - April - May 2022 - 20
PLANSPONSOR - April - May 2022 - 21
PLANSPONSOR - April - May 2022 - By Design
PLANSPONSOR - April - May 2022 - 23
PLANSPONSOR - April - May 2022 - 24
PLANSPONSOR - April - May 2022 - 25
PLANSPONSOR - April - May 2022 - 26
PLANSPONSOR - April - May 2022 - 27
PLANSPONSOR - April - May 2022 - Things People Do
PLANSPONSOR - April - May 2022 - 29
PLANSPONSOR - April - May 2022 - 30
PLANSPONSOR - April - May 2022 - 31
PLANSPONSOR - April - May 2022 - Leakproof Your Plan
PLANSPONSOR - April - May 2022 - 33
PLANSPONSOR - April - May 2022 - The ESG Decision
PLANSPONSOR - April - May 2022 - 35
PLANSPONSOR - April - May 2022 - When Retirees Stay in the Plan
PLANSPONSOR - April - May 2022 - 37
PLANSPONSOR - April - May 2022 - 38
PLANSPONSOR - April - May 2022 - 39
PLANSPONSOR - April - May 2022 - 40
PLANSPONSOR - April - May 2022 - Cover3
PLANSPONSOR - April - May 2022 - Cover4
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