PLANSPONSOR - February - March 2022 - 24

PARTICIPANTS SPECIAL ISSUE | ROLLOVERS
" Those who stay may benefit from
a plan that's well-managed, having
the formal investment oversight of
an independent adviser, economies
of scale for pricing, and access to
investments they may not be able
to access on their own. "
without charge, so that the accounts can be a source of income for
retirees. Some are adding features to support that-for example,
investment advice services that can help with investing for distributions,
which is different than investment for accumulation. "
Sponsors of such plans, as well as recordkeepers, can show
participants the value of keeping their assets qualified. And plan
designs are being adjusted to enhance the appeal, Worrell notes.
" Larger, well-managed plans with accommodative plan
design, and formal, proactive oversight by an adviser and/
or committee of the plan's investments, fees and services may
present a very solid option for terminated or retiring participants
who are considering their choices, " he says.
Select Wisely
Participants are living longer and therefore must consider how
well their defined contribution savings accounts can supply lifetime
income through their retirement years. This has placed a
higher premium on what the worker chooses at any decision point.
From the available options, participants must select what is
best for them, long term, and the sponsor must determine how
best to provide information to help them make these decisions.
Worrell says participants are wrestling with their choices.
Should they take a lump-sum distribution knowing how long
that money might need to last? Annuitize their savings and face
confusing choices, extra expense and possible illiquidity issues?
Or purchase an IRA, which, like defined contribution plans,
have Roth and non-Roth options and differing rules.
All three of these are done, Worrell says.
Drilling further down, how participants choose often is a
reflection of their age, says Joan Neri, counsel at Faegre Drinker
in Florham Park, New Jersey. Older participants with larger
account balances tend to remain in-plan, whereas younger
workers with smaller accumulations are apt to cash out, she has
observed.
" If [those older participants] are satisfied with the investment
performance and the services provided under the plan, it's
24 PLANSPONSOR.COM February - March 2022
a far easier option for them to stay, " Neri says.
Mike Webb, senior financial advisor at CAPTRUST, in
Newton, New Jersey, seconds this, adding that participants with
larger plan balances likely avoid lump-sum distributions because
" if they were to cash out that money, it would be taxable-even
for a retiree-as ordinary income, " he says.
Participants may decide to transfer savings to an IRA in
order to access services, management and expertise that the plan
sponsor no longer gives, if it has, Neri says.
" Suppose the participant is looking for active investment
management services, which may not be available in an employer
plan and would be under the IRA. This would help the participant
with investing so he can make withdrawals at a sustainable
level during his retirement, " she says. " Because you're looking
for that sort of expertise and management, the IRA may look
more appealing. Also, if the IRA offers regular, periodic distribution
options-or even unscheduled distributions without
charge-and the employer plan does not, that's another advantage
the IRA may have. "
Erik Daley, managing principal in the Multnomah Group,
in Portland, Oregon, points to age plus account balance-i.e.,
whether savings are over or under $50,000-as key to whether
participants remain in-plan, or cash out.
" Among those folks who are closer to retirement age-we
tend to see this pattern where dollars stay in the plan for five,
maybe 10, years after separation [from] service, but, over time,
there's no question that those dollars are exiting the plan and
rolling into IRAs, " Daley says. " That's either happening at the
provider where there's a huge capture, or it's happening because
they're being actively solicited by third-party brokers and advisers
who are trying to capture those rollovers. "
Previously, recommending that participants roll over their
savings to an IRA had been the standard practice. Another reason
this has been changing is that life expectancies have grown.
Plan sponsors and recordkeepers have begun to effect a shift
in their philosophy, from plans as purely accumulation vehicles
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PLANSPONSOR - February - March 2022

Table of Contents for the Digital Edition of PLANSPONSOR - February - March 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
Let’s Talk
Let It Grow
When Workers Retire in Stages
Virtual Lessons Learned
Managed Accounts, Today
How ‘Well’ Is ‘Well’ Enough?
Differentiation by Income
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - February - March 2022 - Cover1
PLANSPONSOR - February - March 2022 - Cover2
PLANSPONSOR - February - March 2022 - 1
PLANSPONSOR - February - March 2022 - INSIGHTS
PLANSPONSOR - February - March 2022 - 3
PLANSPONSOR - February - March 2022 - INDUSTRY ANALYSIS
PLANSPONSOR - February - March 2022 - 5
PLANSPONSOR - February - March 2022 - RULES & REGULATIONS
PLANSPONSOR - February - March 2022 - 7
PLANSPONSOR - February - March 2022 - 8
PLANSPONSOR - February - March 2022 - 9
PLANSPONSOR - February - March 2022 - UPFRONT
PLANSPONSOR - February - March 2022 - 11
PLANSPONSOR - February - March 2022 - 12
PLANSPONSOR - February - March 2022 - 13
PLANSPONSOR - February - March 2022 - 14
PLANSPONSOR - February - March 2022 - 15
PLANSPONSOR - February - March 2022 - 16
PLANSPONSOR - February - March 2022 - 17
PLANSPONSOR - February - March 2022 - Let’s Talk
PLANSPONSOR - February - March 2022 - 19
PLANSPONSOR - February - March 2022 - 20
PLANSPONSOR - February - March 2022 - 21
PLANSPONSOR - February - March 2022 - Let It Grow
PLANSPONSOR - February - March 2022 - 23
PLANSPONSOR - February - March 2022 - 24
PLANSPONSOR - February - March 2022 - 25
PLANSPONSOR - February - March 2022 - When Workers Retire in Stages
PLANSPONSOR - February - March 2022 - 27
PLANSPONSOR - February - March 2022 - 28
PLANSPONSOR - February - March 2022 - 29
PLANSPONSOR - February - March 2022 - Virtual Lessons Learned
PLANSPONSOR - February - March 2022 - 31
PLANSPONSOR - February - March 2022 - Managed Accounts, Today
PLANSPONSOR - February - March 2022 - 33
PLANSPONSOR - February - March 2022 - How ‘Well’ Is ‘Well’ Enough?
PLANSPONSOR - February - March 2022 - 35
PLANSPONSOR - February - March 2022 - Differentiation by Income
PLANSPONSOR - February - March 2022 - 37
PLANSPONSOR - February - March 2022 - FIDUCIARY FORUM
PLANSPONSOR - February - March 2022 - INSIDE ANGLE
PLANSPONSOR - February - March 2022 - PLAN PROFILE
PLANSPONSOR - February - March 2022 - Cover3
PLANSPONSOR - February - March 2022 - Cover4
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