Spencer Williams

Automatic rollovers are better than cash-outs for cleaning up small 401(k) accounts, but the ideal long-term solution is for sponsors to enable seamless, automatic plan-to-plan portability.

As President Obama prepares to release his budget proposal that is expected to include a provision to expand retirement coverage among small businesses, there is an urgent need for innovative solutions to help participants take their 401(k)s with them when they change jobs.

Commentary: Auto-enrollment, codified in law by the Pension Protection Act of 2006, was drafted with the best of intentions — to increase Americans’ retirement savings — but it has had the unintended consequence of impairing plan effectiveness.

Commentary: By cutting cash-outs among 401(k) plan participants, sponsors can help more savings stay in the overall retirement system.

Portability solutions are a proven method for facilitating and actively encouraging participants to keep their hard-earned savings in the retirement system.

Reducing cash-outs and stranded 401(k) accounts increases average account balances, a key industry metric for measuring retirement plan success.

Commentary: Many safe harbor IRAs don’t live up to their name and could leave sponsors with unexpected fiduciary liability.

Commentary: The term ‘fiduciary’ is often hard to define and can be interpreted in many ways, so it begs the question: How can plan sponsors best fulfill their fiduciary responsibilities in the context of a mandatory distribution program?

The surge of small 401(k) account balances is the result of a perfect storm — increasing rates of adoption for automatic enrollment combined with the high frequency of job changes observed in today’s mobile workforce.

A plan’s average account balance is a key metric used by recordkeepers and other service providers to evaluate its health. Increasing it can give sponsors the leverage they need to negotiate lower fees.

Like the recycling of paper, glass and plastic, the recycling of retirement savings through automated portability benefits everyone and is easy to implement.

The roll-in is one of the more valuable, yet under-appreciated, 401(k) plan features.

Consolidation actively encourages employees to roll in their prior employer retirement account balances to the current plan at the beginning of employment.

New Year’s resolutions aren’t just for dieters and exercisers. The start of a new year is an ideal time for retirement plan sponsor to assess the effectiveness of their plan. Virtually all plan sponsors have areas that are ripe for improvement.