By Marlene Y. Satter
and third-party administrator Alliance Benefit Group of Illinois is teaming up with Retirement Clearinghouse, LLC to deliver managed portability solutions for participants in the plans it services.
ABGI will provide front-office portability resources to participants, as well as information on the benefits of consolidating retirement savings in their current employers' plans.
When a participant elects to take advantage of managed portability solutions to do so, Retirement Clearinghouse will provide assistance with locating, transporting, and consolidating retirement savings accounts.
ABGI is making Retirement Clearinghouse’s managed portability services available at no cost to participants.
The average worker changes jobs 7.4 times in her career, and loads of those workers cash out retirement plans when they switch employers, rather than leaving money in a previous employer’s
That has two negative effects — one for participants and one for sponsors. Participants suffer because cashouts result in lower retirement yields when the time comes to leave employment for good.
Lost retirement savings annually amount to some $74 billion across the country’s retirement system, with 89 percent of that “leakage” due to cashouts.
The Employee Benefit Research Institute (EBRI) estimates that cutting overall leakage by 50 percent would add $1.3 trillion in assets to Americans’ total retirement savings over the course of 10 years.
Sponsors suffer (and, in turn, participants do so again) because withdrawing the money, rather than transferring it, boosts the costs for employer retirement plans.
While auto enrollment
will place that new worker into a retirement plan, the balance will be far smaller than if she transferred the balance from a previous job.
According to EBRI, in 2012, roughly 40 percent of retirement plan accounts had balances below $10,000.
And all those small accounts translate to higher administrative fees and lower average account balances for sponsors.
Originally posted on BenefitsPro.com