PLANSPONSOR - October 2017 - 24

Rollover Education/Communications
Employer has developed targeted education/communications to participants related to:
n Rolling over past plan balances into current plan
n Distribution/Rollover options upon employee termination/separation
58.3%
46.7%
38.1%
39.5%
34.3%
40.5%
49.1%
37.9%
47.8%
42.9%
36.9%
51.4%
Overall
Micro
Source: PLANSPONSOR Defined Contribution Survey
" Our advice to sponsors is that they
review what their recordkeeper is actually
doing with rollovers and what the sponsor
hopes to see its recordkeeper doing with
rollovers, " says Lori Lucas, defined contribution
practice leader at Callan Associates
Inc. in Chicago. " Are you OK with your
recordkeeper providing advice on rollovers
to your participants? And if your recordkeeper
is not providing that advice, what
would you hope to see your recordkeeper do
on rollovers? "
Employers hoping to retain the assets
" Two-thirds said
they consulted
multiple sources of
information to help
them make their
may be wary of crossing a fiduciary line by
encouraging departing employees to leave
their money in the plan, Lucas says, but
plan sponsors can take several other steps.
Use employee communications to clearly
explain the plan's attractive aspects such as
economies of scale that can reduce fees, and the sponsor's fiduciary
oversight. Also, allow partial distributions and a recordkeeper's
installment-payment setup, which lets a retiree receive
a steady " paycheck " out of his account. It also can help to permit
rollovers into a plan, she says, so that participants have a simple
way to consolidate their assets.
Insights on Rollover Motivation
An Investment Company Institute (ICI) survey released in
January, " The Role of IRAs [Individual Retirement Accounts]
in U.S. Households' Saving for Retirement, 2016, " offers
insight into why departing employees choose to roll money out
of their employer plan. Of the traditional IRA-owning households
surveyed, more than half had rolled over money from an
employer plan; among that group, 82%, in their most recent rollover,
had moved their entire employer-plan balance. Asked why,
24 PLANSPONSOR.com October 2017
decision. And one
of the sources of
information they
often consulted was
the employer itself. "
this group provided three primary reasons:
26% said they did not want to leave assets
behind at their former employer; 19% sought
to preserve the tax treatment of the savings;
and 15% wanted to consolidate assets.
" The thing that really floats to the
surface is this desire to consolidate assets, "
observes Sarah Holden, ICI senior director
of retirement and investor research in
Washington, D.C. " Many of them may say, 'I
want to try to preserve my assets in one spot,
so I can keep track of them.' " Some others
likely want to consolidate and then invest in
the wider array of investment options available
in an IRA versus an employer-based
plan, she says.
Holden found it encouraging that most
of those surveyed had put real thought
and research into their rollover decision.
" Two-thirds said they consulted multiple sources of information
to help them make their decision. And one of the sources
of information they often consulted was the employer itself, " she
says. Asked what employers can do to help departing employees
make their decision to stay in the plan vs. do a rollover, she says,
" Make sure they really explain the pros and the cons in an objective
way. "
Research by Alight also sheds light on departing employees'
rollover decisions. The firm's " Universe Benchmarks " report
found that, among participants in its database who left an
employer in 2016, 43% cashed out their balance. Twenty-six
percent rolled the money over to another qualified employer plan
or an IRA, and 31% left their money in the plan. " If you look at
it on a head-count basis, what you see is that people with really
small benefits tend to cash out their balance, " Austin says.
Small
Midsize
Large
Mega
http://www.PLANSPONSOR.com
PLANSPONSOR - October 2017

Table of Contents for the Digital Edition of PLANSPONSOR - October 2017
