PLANSPONSOR - February/March 2021 - 37

PLAN DESIGN | PLAN ASSETS
in an operational retirement paycheck.
" Participants need advice and guidance
to combine those things in a way
tailored to their individual situations, " she
continues. " All that is a lot more complicated
than helping someone accumulate
for retirement, and most 401(k) plans have
not evolved to that point. "
To help sponsors strengthen their
stay-in propositions, Carol Waddell,
head of retirement solutions at Empower
Retirement, in Greenwood Colorado,
advises four best practices that her own
firm uses. " One is setting up more proactive
communications, to encourage participants
to bring their outside assets into the
plan, " she says. Second, " We have proactive
outreach at the time of termination, which
gives retiring participants personalized
projections on keeping their assets in a
tax-deferred account, versus cashing out. "
Third, she advocates for electronic
transactions. " We see many paper check
transactions at the smaller end of the
market-that slows down the process. "
A fourth recommendation is to provide
access to a human consultant: " We act as
fiduciaries on distributions into or out of
plans, to help people review their options. "
" Here's what not to do for stay-in
retirees, " advises Lorie Latham, senior
defined contribution strategist in the
Charlotte, North Carolina, offices of T.
Rowe Price Group. " About 40% to 50%
of sponsors with plan assets of more
than $500 million say they want retirees
to stay in their plan. But when we ask
sponsors what they do when someone
retires, many show us a document that
says 'Here's how to roll over,' rather than
communication that encourages staying
in the plan. "
The communication should start
when employees reach their 50s, she says.
" If the first thing they hear is how to roll
their money over, they'll take that as a cue
for what they're supposed to do. Instead,
create the message that you want them to
stay in, and express the benefits of oversight
and lower fees-and, without question,
the benefits of account consolidation. "
" ... moving to a new employer can
be a great inflection point for the
participant, to get people to step
back and re-evaluate their overall
investment strategies. "
A Process in-Process
The benefits of rolling in assets of current
workers from prior employers are similar
to those for a retiree-consolidated participant
accounts and the prospect of lower
fees. " Having all the money in one place
gives participants more confidence, "
says Roy. " The overall experience will be
better and give people a better litmus test
of whether they're on track to produce a
successful retirement income. "
For yet another reason to consolidate,
each recordkeeper makes retirement
income estimates using its own
model; having several projections might
give the participant a false impression of
what he has, says Gregg Levinson, senior
consultant-retirement, defined contribution,
governance and compliance in
the Philadelphia office of consultants
Willis Towers Watson.
" We think that moving to a new
employer can be a great inflection point for
the participant, to get people to step back
and re-evaluate their overall investment
strategies, " says Waddell. I would say that,
in about 40% of the roll-in conversations,
we provide advice on investing. "
But the transaction process can be
complicated, causing many employees
to leave assets in place. Interestingly,
several of the experts consulted-people
who acknowledged that they should know
better-confessed to having left balances
at old jobs to avoid the hassles.
" The biggest shortcoming is the lack
of digital transfer from one 401(k) account
to another, " says Eliza Badeau, vice president
of workplace thought leadership at
Fidelity Investments in Boston. " You need
to have a physical check from the first
employer. But now employees can take a
digital scan of the check and send that over
to the receiving recordkeeper. "
Physical checks can be perilous, Roy
observes. " Any time a participant gets a
check, they have a finite window within
which to deposit it and not have tax consequences.
We don't want the cash to be
in-hand-we want it in the system. "
At Retirement Clearinghouse,
founder and CEO Spencer Williams says
that while people can get cash instantly
from a machine anywhere in the world,
they have difficulty moving retirement
assets. " Each transaction requires multiple
phone calls, unique sets of forms, and challenges
in prying the money loose, " he says.
In 2007, the firm developed a service
for its largest client, a 250,000-employee
health care provider, to smooth the delivery
of small balances for people leaving the
firm. Then, in 2011, the client requested
an inbound service for new hires. Williams
says, " We've been automating parts of
it and tried to put together a nationwide
network of recordkeepers to enable these
transactions. " After securing an opinion
from the Department of Labor, RCH can
now digitally capture distributions and roll
them into the participant's next plan. Still,
uptake has been slow.
RCH has been hired as a subcontractor
to roll in new employees for
the Federal Thrift Savings Plan. " We
think that's what's going to change the
market, " Williams says.
Having a 360-degree view of a
person's savings through consolidating
401(k) accounts is essential to a proper
path to retirement, he says. -John Keefe
PLANSPONSOR.COM February - March 2021 37
http://www.PLANSPONSOR.COM
PLANSPONSOR - February/March 2021

Table of Contents for the Digital Edition of PLANSPONSOR - February/March 2021
