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Near Retirement Employees Need Account Consolidation Assistance

Required Minimum DistributionsNear retirement employees are at an inflection point now in terms of sheer numbers.  By 2030, all Baby Boomers will be at least age 65, according to the U.S. Census Bureau.  That introduces a unique challenge for retirement plan sponsors and committees.  The question is:  How can plan participants be helped to consolidate their savings all in one place to prepare to spend down those assets in retirement?

A recent article in Employee Benefit News focused on this conundrum for near retirees as part of a new weekly series called “Ask an Adviser”.  EBN featured Spencer Williams, president and CEO of Retirement Clearinghouse, to help plan sponsors consider solutions to prepare near retirement employees to generate a steady stream of income in retirement.  At issue is that near retirement employees may have a number of retirement accounts!  They may be spread among multiple employers.  It is not unusual.  Many near retirement employees have left behind retirement assets in former employers’ plans throughout their careers.  Mr. Williams cited a statistic from the Employee Benefit Research Institute (EBRI) that the average 60-year-old Baby Boomer nearing retirement will have switched employers 10 times during their career.  As such, many Baby Boomers may be managing their current 401(k), in addition to an individual retirement account (IRA).  Or, they may have several retirement accounts from former employers.

Mr. Williams said that retirement plan sponsors and committees can play a primary role in helping near-retirees simplify their path to decumulation.  One method is holding virtual or in-person meetings with employees that are near retirement age as part of your financial wellness program.  During such meetings, ask about past employer based assets.

Consider these three important questions:

  1. Were you in enrolled in the 401(k) plan?
  2. What happened to your account when you left?
  3. Who is the plan’s recordkeeper?

Once you’ve collected and reviewed this information with a participant, you may want to refer them to the call center for the former plan’s recordkeeper.  Always be aware if such advice is offered in an unbiased manner, according to Mr. Williams.  In other words, will the recordkeeper be helpful (and willing)?  An option may be to roll the assets out of a former employer’s plan and into the current one.  Another alternative is to refer a reputable, inexpensive roll-in service provider.  They normally have the capability to locate and consolidate IRAs and 401(k) accounts from former employers’ plans.  That service provider could then help the employee to roll over all of their prior accounts into their active account in your plan, however, one must first check to see if the plan permits roll-in contributions from other 401(k)s or IRAs.

Mr. Williams explained that an external service will typically work on a fee-for-service basis for all participants, no matter their account balance.  Plan sponsors would have to pay these fees, but if they do so and if the service is available to all participants, then they are considered permitted plan expenses.

While account consolidation certainly benefits near-retirees for obvious reasons, all participants can reap gains from such a service.  A 2015 study on mobile workforce behaviors, conducted by Boston Research Technologies and Retirement Clearinghouse was cited by Mr. Williams in the EBN article.  It was discovered that 93% of participants surveyed considered roll-in assistance to be a “good” or “valuable” benefit.  Approximately 4.3 million Americans quit their jobs in August 2021.  And  approximately 10,000 Baby Boomers turn 65 every day!  As a result, near retirement employees roll-in services may be worth considering.  Such a service (employee benefit) can help aid retirement account consolidation for your workforce and, as a result, better retirement outcomes.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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