PLANSPONSOR - February/March 2019 - 25

Options to Facilitate Roll-Ins
If a sponsor wants to aid the process of rolling employees' inactive
accounts into their new plan, there are several approaches
they can consider.
* Seek logistical assistance. The perceived hassles
of a roll-in frequently discourage participants from doing one.
" The paperwork is complicated, because you're dealing with two
different recordkeepers, and they have different requirements
for what you need to roll the money out of a plan and then to roll
the money into a plan, " Steele notes. " Some vendors deliberately
make taking a distribution more difficult, because that's their
way of discouraging leakage. " It helps if the recordkeeper of the
employee's current plan has a " rollover central " service that can
help guide a participant through the roll-in process, she says.
Ask if this is available or possible.
* Target education. One of Alight Solutions' employer
clients designated a " Roll-in Month, " in which it encouraged
employees to roll their money into the plan. " The message was,
'Hey, you know this is the right thing to do, and so why not do
it now?' " Austin says. At month's end, the company had a raffle
drawing that included everyone who had rolled in an old account,
and the winner received a gift card.
Some of Alight Solutions' sponsor clients also include
targeted communications in employees' new-hire packets.
" People are thinking, 'I'm excited about moving to my new
employer,' " says Austin. " And hopefully they have '401(k)' on the
brain at that point. So why not capture their attention then? "
Asked about effective roll-in messaging, he says it explains
how participants benefit from keeping their retirement savings in
one place. " Make it easier on yourself, " he advises. " Yes, you need
to take an action now, but you will see the benefits down the road. "
For sponsors that are interested, Empower performs a proactive
roll-in communications campaign that includes an email to
participants and links to a customized video spelling out the
retirement-income benefits. " The video will show the participant
something personalized such as, 'If you roll in another $25,000,
your retirement-income projection will go up, for example, from
$1,100 a month to $1,300 a month,' " Waddell says. " The participant
immediately sees the benefit of doing a roll-in. "
* Provide fiduciary advice. Some recordkeepers and
advisers offer participant-level 3(21) fiduciary advice that includes
roll-in counsel. " We can provide participants with a specific,
personalized recommendation on doing a roll-in, " Waddell says,
referring to such advice that Empower offers. " We collect suitability
data from the participants that complies with FINRA
[Financial Industry Regulatory Authority] guidelines, and we
can also do a fee comparison between the employee's old plan
versus the new plan. " -Judy Ward
DOL OFFERS AUTO-PORTABILITY CLARITY
T
he U.S. Department of Labor (DOL)
recently has clarified key fiduciaryresponsibility
questions for the
Retirement Clearinghouse (RCH) automatic-portability
program.
In Advisory Opinion 2018-O1A,
issued this past November, the DOL said
that sponsors have fiduciary responsibility
when opting to use the RCH program
for their participants, but they are free of
responsibility for an auto-portability transaction
itself. " This confirms to sponsors
that they are not a fiduciary with respect
to the decision to roll money into an individual's
current employer plan using the
RCH system, " says Spencer Williams of
RCH. " The DOL opinion essentially said,
'We see this as a settlor transaction for
the plan sponsor.' " The advisory opinion
goes on to identify RCH as a fiduciary in
those instances where a participant does
not provide affirmative consent and RCH
effects the roll-in transaction.
In addition, the DOL issued a notice
of proposed exemption, also this past
November, that provides RCH with a
prohibited-transaction exemption (PTE)
that exempts the firm from fiduciary
responsibility from the conflict of interest
that arises when RCH collects a fee for the
roll-in transaction. " Under the terms of
the proposed exemption, RCH is required
to abide by a very strict set of terms and
conditions the DOL set to protect the best
interests of the participants, " Williams
says. " The prohibited-transaction exemption
essentially says,
'Retirement
Clearinghouse, if you strictly follow these
rules, you are not committing a prohibited
transaction for this roll-in transaction.' "
Now that the DOL has weighed in on
two key fiduciary questions concerning
RCH's auto-portability system, Williams
says he thinks sponsor interest will
grow in automatically moving an inactive
participant's retirement account in a
former employer's retirement plan to the
individual's active account, assuming the
balance is less than $5,000. " This sets a
new standard of care for automatic rollovers, "
Williams says, adding that the
scenario for participants is better than a
force-out to an automatic individual retirement
account [IRA]. " The job of a sponsor
is to act in the best interests of participants, "
he says. " I think we can make a
robust argument that it is not in the best
interests of a participant to have assets
stuck in an auto-IRA. "
The outlook for an automatic-portability
concept will much depend on
whether enough recordkeepers decide
to join in, so the auto-portability system
achieves critical mass, says Jack VanDerhei
of EBRI. " The recordkeepers will need to
do their cost-benefit analysis, " he says.
" But I think this is a situation where,
[hypothetically,] if the recordkeepers
are dealing with 1 million decent-sized
account balances as opposed to 10 million
account balances, most recordkeepers will
have an overall better situation. " -JW
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