Commentary: Mandatory distributions of small 401(k) accounts when participants separate from service provide many benefits for plan sponsors, including lower administrative costs and higher average account balances. However, these automatic rollovers also indirectly cause billions of dollars to leak out of the U.S. retirement system every year through cash-outs.
Sponsors that concentrate on rollovers without using their roll-in features are sub-optimizing their plans effectiveness and hurting the U.S. retirement system by creating a bigger landfill for stranded and cashed-out retirement savings, rather than recycling participants savings back into their current employer plans as they change jobs.
