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DC plans playing catch-up on education for roll-ins

Posted On: Apr. 20, 2015 12:00 AM CST

Defined contribution plans — from the International Paper Co. 401(k) plan to the federal Thrift Savings Plan and Oregon Savings Growth Plan — are allowing employees to roll in disparate retirement account balances from previous employers and individual retirement accounts, trying to help reduce the burden of managing multiple accounts and take advantage of lower fees.

While many DC plans allow participants to roll in outside retirement accounts, few take significant steps to help participants consolidate their accounts.

A study published in October by Boston Research Technologies, reported 96% of DC plans with assets of more than $5 million allowed roll-ins. Of that group, however, 45% of DC executives said they “actively encourage” roll-ins. The definition of “actively encourage,” CEO Warren Cormier said in an interview, was left up to the respondents.

Among plans with more than $5 million in assets, the firm’s research also found an average of 5% of new employees rolled in assets from a former employer, Mr. Cormier said. The same average percentage held true for new employees in plans with assets of less than $5 million.

Some DC plans that have been offering roll-ins for some time have expanded education and communication campaigns in recent years, working closer with record keepers and specialists in retirement-account consolidation to reduce paperwork and bureaucracy that has discouraged roll-ins.

Pilot program

International Paper Co., Stamford, Connecticut, launched a pilot program in December to encourage employees to consolidate outside accounts within the company’s $5.2 billion 401(k) plan.

“Our overall philosophy is to keep people in the plan,” said Carol Sung, 401(k) product manager and a winner of a Pensions & Investments Innovator Award last year for her efforts to convince employees to keep retirement money in the plan.

The 401(k) plan has allowed roll-ins for many years. Ms. Sung said she has worked with record keeper Empower Retirement to streamline the process, which “has been challenging and time-consuming for employees.”

Her company was prompted, in part, to further improve roll-in opportunities by a Government Accountability Office report in 2013 that outlined hassles throughout the DC industry that discouraged people from consolidating multiple accounts in their employers’ plans.

Ms. Sung said she was approached by Empower officials to participate in a roll-in pilot program that affects about 4,000 of the plan’s 55,000 participants.

Participants who opt in are assigned a case manager from Empower. These roll-in specialists “basically hold their hand through the process,” Ms. Sung said. “It’s a way for us to promote satisfaction and engagement with their retirement savings plan.”

Intuit Inc., Mountain View, Calif., began a formal roll-in program in January, said Joshua Newmister, global retirement leader, in an e-mail. The policy covers active and former employees in the 401(k) plan, which has assets in the $1.3 billion range.

A roll-in “eliminates the administrative burden for participants to manage multiple accounts and investments,” Mr. Newmister wrote. “This is applicable not only during the working years, but in retirement as well.”

The size of the Intuit plan allows it to offer “extremely cost-competitive, well-diversified offerings — better than what most individuals could achieve on their own in an IRA,” he added.

Some DC executives with plans that have allowed roll-ins for many years cited specific events that encouraged them to expand their education and communication practices.

The nation’s largest defined contribution plan — the $450 billion federal Thrift Savings Plan — decided to re-evaluate its roll-in strategy after reviewing the 2013 GAO report, said Greg Long, executive director of the Federal Retirement Thrift Investment Board, Washington, which administers the plan that covers 4.73 million participants.

Although the plan has allowed roll-ins for more than a decade, “we’ve had an evolution in our thinking,” Mr. Long said. “Initially, we took a very cautionary approach. The GAO report prompted us to ask questions internally.”

The plan places roll-in information in its quarterly newsletter, an annual statement to participants and on the plan’s website, as well as YouTube and Twitter. A brochure, “Investments All Over the Map?” tells participants how to submit a consolidation form and talk to a plan representative.

Last year, the plan received $1 billion in roll-in assets, including $135 million in December — a record monthly total.

HCA Holdings Inc., Nashville, Tennessee, started encouraging roll-ins in 2011, first to new employees and later to existing employees, said Sherri Henry, vice president of employee benefits.

Ms. Henry said HCA wasn’t pushing employees to put all their eggs in the $13 billion 401(k) plan basket with 220,000 eligible participants. However, concerns about the cumbersome roll-in process and about “fragmented 401(k) balances” dictated a change.

HCA hired RolloverSystems L.L.C., Charlotte, North Carolina, now known as Retirement Clearinghouse L.L.C., to coordinate roll-ins. The firm educates participants about roll-ins and assigned a case manager to employees wishing to transfer their accounts to HCA from former employers.

Ms. Henry said 10,715 employees consolidated outside accounts with HCA — representing a total of $200.7 million — from early 2011 to year-end 2014. During that period, the company hired 165,161 new employees.

Some record keepers, even those with an active rollover IRA business, also provide roll-in services. Fidelity Investments, Boston, has a program that allows a participant to transfer from one Fidelity plan to another online. “We work with sponsors to ease the administrative process,” said Meghan Murphy, director, Fidelity Investments.

The Oregon Savings Growth Plan, Salem, Oregon, allowed roll-ins for more than a decade but in recent years has enhanced education and communication, said Gay Lynn Bath, deferred compensation manager of the $1.7 billion plan that serves about 25,300 participants.

The plan’s enrollment kits provide roll-in information because “we want them (new employees) to consolidate their accounts,” she said.

Ms. Bath said roll-ins can be an administrative chore for participants, especially if former employers erect bureaucratic roadblocks. Her plan’s record keeper, Voya Financial, helps participants and contacts record keepers of former employers to speed up the process, she said.

Robert Steyer writes for Pensions & Investments, a sister publication of Business Insurance.