Saving and planning for retirement has changed but in some ways the industry and plan sponsors have not kept up. Younger people, especially Millennials, change jobs more often and they expect to rely on their DC plan like a 401k or 403b as the main source of retirement income rather than DB plans or Social Security. They also do not read written materials. A plan sponsor with 15,000 employees at a TPSU program held at SMU conducted by NFP plan advisor Kim Pruitt reviews how she uses roll-ins to help her younger workers.
Though employees have to wait 90 days to join the Dallas based company’s 401k plan, they can roll in money from other qualified plans almost immediately. The program is designed to help all workers, but especially Millennials, to become more retirement ready as well as avoid leakage which is likely to happen when people change jobs and have a string of small balance accounts. The senior HR person at the 15,000 company also realizes that recruiting the best talent is competitive and that the roll-in program helps people feel more connected to the company.
According to a study sponsored by Rollover Clearing House conducted by Boston Research Technologies, as many as 73% of plan participants would be willing to use and pay for an employer sponsored roll-in service which can take as much as two months to accomplish when employees do it on their own. And as many as 91% of employees would prefer to roll-in their previous balance rather than keep it in their previous employer’s plan or roll it into an IRA. Regrettably, 24%-34% have cashed out their DC account depending on the generation causing severe penalties and taxes. As expected, cash outs are more frequent among lower income employees.
But the key is communication and the right communication which is still a challenge for this 15,000 employee company. The HR manager plans to sit down with her provider to find unique ways to reach Millennials which is not to bury the roll-in information in written materials. Stay tuned – roll-in could be a huge win for all parties and could become more popular as the new DOL rule could make rollovers more difficult.
