Alliance Benefit Group of Illinois (ABGI) is partnering with Retirement Clearinghouse to assist participants with consolidating their retirement savings in their current employers’ plans. Retirement Clearinghouse will help participants locate, transport and merge their accounts.
This partnership is the first relationship Retirement Clearinghouse has with a third-party administrator (TPA)/recordkeeper where the TPA/recordkeeper is paying for the cost of the consolidation services; there is no cost at all for the sponsor or the participant. Retirement Clearinghouse has contractual relationships with 42 other TPAs/recordkeepers, most of which are based on automatic rollover services. The company also has one-off relationships with a number of recordkeepers to facilitate rollovers at large plans.
“Once we identify a participant who is interested in this offering, Retirement Clearinghouse will work directly with them to seamlessly move retirement assets from an inactive plan, IRA or both to their current plan under ABGI—benefiting participants, our plan clients and the retirement system as a whole,” says John Blossom, Jr., president and CEO of AGBI. “We hope participants in the plans we administer will take advantage of this opportunity to receive much-needed assistance with consolidating what they’ve saved during their working lives—which can potentially increase their income in retirement and is available at no cost to them.”
A recent survey by Boston Research Technologies found that if they were offered a rollover service, 83% of Millennials, 83% of Generation X-ers and 78% of Baby Boomers would take advantage of it, according to the firm.
Rollover services are sorely needed, AGBI says, pointing to a U.S. Government Accountability Office report that found that the nation’s retirement system loses $74 billion in assets every year, and 89% of this leakage is the result of cash-outs. The Employee Benefit Research Institute (EBRI) estimates that if leakage was reduced by 50%, Americans would have an additional $1.3 trillion in savings over the course of a decade. EBRI has also determined that due to auto enrollment, there is a plethora of small retirement accounts; in 2012, 40% of retirement plan accounts had balances less than $10,000.
Spencer Williams, president and CEO of Retirement Clearinghouse says: “Consolidating retirement savings accounts is a cumbersome and time-consuming process, and participants who don’t receive guidance tend to cash out or leave their balances behind. These decisions can deplete participants’ savings over time, so Alliance Benefit Group’s forward-thinking is vital for helping Americans save more for retirement.”
Retirement Clearinghouse also notes that most plans allow rollovers; according to the Plan Sponsor Council of America 2014 Annual Survey of Profit Sharing and 401(k) Plans, 98.4% of plans accept rollovers from other plans.