Study Finds Rollover "Relationships" Lacking

January 10, 2005 ( - Plan sponsors are well aware that providers are eagerly eyeing the opportunity to manage participant accounts once they leave the plan - but a new study suggests that that desire still is largely unrequited.

The study, Capturing and Retaining Rollover Assets at The Retirement Inflexion Point, conducted by Wayne, Pennsylvania-based Diversified Services Group, Inc. (DSG), indicates that more than a third of today’s near-retirees are unable to even identify their current retirement plan provider.   It is perhaps not surprising then that more than half of all retirees rolled their assets to a new account at the time of retirement, according to the study.

The results echo those of a finding released last fall by Stamford, Connecticut-based Brightwork Partners, which found that just 24% of participants rolling over from a 401(k) or similar plan into an IRA will choose the plan provider to manage their assets, down from 2001, when 29% chose that route (see  Rollover Retention Rates Down, Survey States ).

Ramping Up

The DSG report notes that retention of rollover assets is fast becoming a major issue for most plan providers, with 2/3 of provider firms interviewed having organized in some way to facilitate asset retention.   In fact, a number of platforms and alliances incorporating those platforms have been unveiled in recent months, including  RolloverSystems Wealth Management Systems , Inc., and  SunGard/ProNvest .   Additionally, a number of providers have rolled out capabilities touted as responding to the upcoming need for plans to accommodate so-called “automatic” rollovers for undesignated distributions greater than $1,000, but less than $5,000, which goes into effect March 28 (see  IRS, Treasury Issue Automatic Rollover Guidance ).   Some firms have gone so far as to create positions within their organizations focused on the issue of rollover retention (see  Marcks Named to Pru Rollover Unit Post ).

The study, whose primary intent was to provide insights to firms that are seeking to improve their retention or capture of retirement plan assets, suggested that a “significant majority” of employers interviewed would welcome more help from their plan providers to counsel employees on retirement distribution decisions, provided that cost, objectivity, and other criteria were met.   In fact, an admittedly unscientific polling of NewsDash readers last month found that nearly a third said that plan sponsors needn’t concern themselves with rollovers, at least not prior to that final, pre-retirement distribution.   

According to Wm. Borden Ayers, a DSG principal and leader of its retirement market practice, “Considering that the companies we spoke with are ‘losing’ between $500 million and $4 billion of assets each year to rollovers, retention is an issue that is worthy of much more attention by firms who are actively providing and servicing defined contribution retirement savings programs, especially 401(k) plans. The opportunity is still wide open: Pre-retired employees are very receptive to receiving help and advice, and they are typically not going to get it from their employer.”

The DRG report includes the findings of three separate, but complementary, research efforts: qualitative in-depth interviews of retirement plan sponsors (employers) and defined contribution retirement plan providers (executives) and a quantitative consumer survey conducted among pre-retirees and retirees.

You can find out more about the DSG study at