A Real-World 401k Rollover Disaster Story. Forgive me if today’s post seems a bit self-serving, but I have a grievance to share related to my employer’s retirement plan that in the bigger picture, is relevant for all plan sponsors. In short, in addition to being a freelance financial writer, I also have a full-time day job. I’m trying to roll over my 401k from a previous employer, and it’s proving to be more challenging than I think it should be.
The “too long didn’t read” version: plan sponsors, if an employee wants to complete a rollover, please make every effort to make it as easy for them as possible, and help them as much as you can. We talk a good game about retirement account consolidation, and we encourage it, but if it isn’t a simple process, people simply aren’t going to do it. And that’s a detriment to everyone, because the benefits of consolidation far outweigh the pitfalls of having multiple accounts at several different employers, not the least of which is a trail of paperwork, tax issues, and the missed opportunities for individuals to maximize the advantages of compounding by having all of their assets in one retirement account.
Without further ado, here’s my story. A few weeks back, at the behest of my financial advisor, I initiated the rollover process to transfer my 401(k) contributions from my previous employer’s retirement plan to my current employer’s. I logged in to my former employer’s retirement plan provider’s site online, downloaded and completed the necessary paperwork, and sent it off. The instructions indicated that I have the two rollover checks (one for my traditional 401k contributions, and another for my after-tax Roth 401k savings) made out “For the benefit of (FBO)” myself, and have them sent to my employer’s headquarters. Since I am a U.S.-based employee of the company I work for, I had the checks sent to our U.S. headquarters, figuring HR personnel there would know what to do with them.
Well, that was my first mistake. The checks arrived, safe and sound, at my company’s U.S. HQ. The office manager there emailed me to let me know that she’d received some checks on my behalf and asked them what she should do with them. That’s odd, I thought. So I emailed her back and informed her they were for my 401k rollover and asked if she could forward them to HR to be deposited into my 401k account. She wrote back and said she didn’t know where to send them and asked if she could mail them to me. Figuring I’d just sort out the mess on my own rather than involve a third party with no vested stake in the security and well-being of a portion of my retirement savings, I agreed and sent her my mailing address.
A few days later, I received the checks at my home in California. (Too bad you can’t rack up retirement savings based on how many miles your rollover checks travel.) Since I struck out with HQ, I called my current employer’s retirement plan provider to ask them which address I should send my rollover checks to so they could be put into my current 401k. While on the phone, I learned I would also have to fill out a separate set of rollover paperwork for my current employer’s plan and have someone from our management team sign off on it before the checks could be deposited. Well, I informed the customer service representative, that would be fine and well if we all worked in the same office. Or even on the same continent. But my company’s management team is based in Israel. I’m a remote employee who lives half a world away in California. She suggested emailing the paperwork to the appropriate parties, having them sign off on it, then ask them to email it back to me so I could fill it out and send it into the provider with my rollover checks. Is your head spinning yet?
Wait, it gets more complicated. I hang up with the representative and log into to the provider’s website to download the rollover paperwork. I can’t find it — anywhere! Frustrated, I email one of the employees in Israel who has the authority to sign off on my rollover paperwork and ask him if he can help me. Now, he’s a very busy executive, so as expected, he passed the baton to someone on our U.S. payroll team and asked them to assist. But here’s where it gets weird: the U.S. payroll person emails me and, instead of providing instructions to complete the rollover — which I specifically requested in my email — simply writes: “Please let me know if you have any further questions.”
Well, yeah, as it happens, I have lots of questions. Where do I find the rollover paperwork? Who’s going to sign off on it? How do I facilitate that? How long is all of this going to take? Why isn’t this process easier? Why don’t we have any materials available for employees to help them with this? Why am I in charge of figuring this out all on my own?
As of this writing, my issue still hasn’t been resolved, nor do I have answers to any of my questions. And my rollover checks are still sitting on my desk. Needless to say, I’m frustrated that what I thought would be a simple process hasn’t turned out to be easy at all. I should mention my company’s HR department is pretty de-centralized, and we outsource all of our benefits functions to third-party providers, including the retirement plan. It makes it pretty challenging for employees to take advantage of those benefits. I’m not complaining (well, maybe a little), but that’s how things are set up where I work.
All of this is to illustrate for plan sponsors some of the real-world frustration and fiery hoops your employees may feel and go through when trying to coordinate a transaction like a retirement plan rollover. Some key takeaways:
- Make it easy for your employees to find the paperwork necessary to complete transactions like rollovers, beneficiary changes and the like. If possible, ensure they’re in a centralized location, like the company intranet (my employer doesn’t have one), or at the very least, coordinate with your retirement plan service provider to make sure all of the necessary documents are located on their website and that they’re easy to find.
- If an employee comes to you with a question about a rollover or issues pertaining to the retirement plan, be as responsive and helpful as you can. It’s okay to refer the question to someone who’s more hands-on than you, or who deals with these issues as part of their day-to-day responsibilities but make sure that person can sufficiently answer questions and knows how to communicate with employees to get the issue resolved as quickly as possible.
- Provide educational materials for employees that explain how to access their retirement plan benefits, navigate the provider’s website (if applicable), and how to find the key plan and transactional documents.
Basically, put yourself in your employees’ shoes and take a look at your retirement plan from their perspective. What about it would frustrate you? How can you make it easier for employees to take full advantage of this valuable benefit? How can you help facilitate key transactions, like a rollover, and reduce friction and frustration points as much as possible?
As for me, I’m off to write yet another email to see if I can get this rollover done. Wish me luck.