401k Action: Assisted Roll-Out?



Businesses, the retirement industry, and, of course plan sponsors, are abuzz with how to facilitate the portability of retirement savings when employees change jobs Making portability a reality in 2022 requires “roll-out” support when employees leave jobs. Good news: providing roll-out support is pretty much a no-brainer.


Reduced Risks for All?

Supporting outgoing employees to transition their retirement accounts is both good for people and good for business. Of course portability helps people stay on a financially healthy path to retirement. It’s also a proactive way for plan sponsors to avoid costly missing participant issues down the road. As 401k Specialist Magazine  sums up: “Initiatives that facilitate portability are the hot new trend for plan sponsors, since they not only reduce fiduciary risk but make significant, quantifiable contributions to employee financial wellness programs by preserving retirement savings.” 


Making portability a widespread reality requires employers to assist new employees to “roll-in” retirement accounts from previous jobs and to help outgoing employees make plans for their retirement accounts. 401k Specialist Magazine offers this intel about providing roll-out assistance to separated employees not subject to mandatory distributions:


Following a job change, these participants typically receive a termination notice outlining their options for the plan account (leave in-plan, cash out, rollover to an IRA, or roll in to a new employer plan), which is often accompanied by a distribution form.  Unfortunately, absent any meaningful education and assistance, most participants will take the easiest path — either cashing out or leaving the balance behind — as neither decision involves the headache of navigating contribution forms for an IRA or the new employer plan.


Both options are sub-optimal, as cashing out wreaks havoc on retirement outcomes, while leaving balances in-plan can result in higher fees, forgotten accounts, or both, and can eventually present fiduciary challenges for plan sponsors.


For these participants, the timely provision of unbiased education and one-on-one assistance via a facilitated roll-out program can make a tremendous difference in retirement outcomes, allowing the participant to easily implement the decision that’s right for their needs.  Research indicates that a facilitated roll-out program can consistently reduce cash-out leakage levels by over 50%, across all balances. Finally, a roll-out program can be easily implemented at no cost to the sponsor, negligible cost to the participant, and can mitigate fiduciary risk by reducing missing participants.


Missing Participants?

As you gear up to facilitate portability in 2022, be sure you have attended to the Department of Labor’s missing participant guidance issued early in 2021. Specifically, you are now expected to: maintain complete and accurate census information; communicate with participants and beneficiaries about their benefit eligibility; and, implement effective policies and procedures to locate missing participants and beneficiaries.


Given the many—and expanding— responsibilities of being a plan sponsor, it’s best practice to protect yourself with fiduciary liability insurance. Even the allegation of a breach of your fiduciary duties can be costly for you and your business. There’s no need to go it alone. Colonial Surety’s fiduciary liability insurance covers your business—and you as the fiduciary—against claims of alleged or actual breaches of duty in connection with the employee retirement plan. Our affordable annual premiums are less then what you will pay for just one hour with an expert ERISA attorney if a lawsuit lands in your in-box. We even include cyber liability insurance.


Obtain Fiduciary Liability Insurance, With Cyber, Right Here.


Good For Everyone

In addition to all the other good reasons to help employees—past and present—save for retirement, doing so reduces financial stress at work. Employees who are less stressed do better at work—and of course that ripple demonstrably benefits the bottom line of our businesses. One important way plan sponsors can support portability is to stop the practice of “automatic cash-outs.” Experts advise that although it is a permissible and common practice to cash out accounts of less than $1,000 that are left behind by former participants, doing so is not constructive and clearly not in the best interest of participants. Research shows that participants do care about the money lingering in retirement accounts when they change jobs—they just need more help with options, like rolling the funds into a new retirement account.


Three-Point Plan for 2022?

Tackle your plan sponsor duties with confidence in 2022, knowing that your three point protection plan is in place. Colonial’s multi-year packages provide the greatest convenience and value, ensuring continuous compliance and protection. Lock in your coverage and rates now. We even offer locked-in multi-year rates and installation Extended coverage to ensure your ERISA bond remains US Department of Labor compliant is included too. Packages include:


  • The required ERISA bondwhich protects the assets of the retirement plan from theft.
  • Fiduciary Liability Insurance to protect you and your assets from personal liability.
  • Cyber Liability Insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.


Colonial makes it so easy and reasonable to secure this coverage that you can do it now, right here: Complete Plan Sponsor Package Here.


Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.