According to research by Aon Hewitt, about half of participants with account balances of less than $5,000 were forced out of their plans in 2011, up from just one-third of such participants in 2005. Plan sponsors are realizing that maintaining low account balances from terminated employees raises their costs. For example, the 401(k) Averages Book estimates that a $10 million plan with an average account balance of $10,000 pays 144 BPs, while a similar sized plan with an average of $50,000 balance pays 122 BPs.
While it’s easy to write off these low-balance participants, many people have small accounts in various DC plans or IRAs that, if consolidated, could add up to significant assets. Do you have a roll-in strategy for current participants?
