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READER POLL: What’s Your Rollover Ratio?

The challenges associated with rolling over one’s 401(k) balance from one plan to another are well-chronicled – and they’ve been known to thwart the most determined account consolidator. This week we asked NAPA Net readers about their experience with rollovers.

It may be an issue for some, but since nearly half (48%) have only one account – not so much. Beyond that, 10% who say they have only had one employer also only have one account. On the other hand, roughly a quarter (24%) have three accounts at present, and the remaining 18% have two.

Not surprisingly – certainly in view of the current number of accounts – nearly 6 in 10 (59%) had rolled over a balance. There are, of course, rollover services out there, and in fact 18% of this week’s respondents have used one (7% said it was “great”). On the other hand, 1 in 10 “didn’t know such things existed,” and the rest simply responded that they hadn’t. In the “other” category was the reader who said that their experience was “not exactly, but the receiving recordkeeper did prefill my forms for me.”

Rollover Recommendations?

We also asked if readers encouraged participants to rollover. A quarter (25%) responded, “you betcha,” 29% said “generally,” 7% went with “sometimes,” and the rest were in the “depends on the plan” category. One reader explained that, “Historically have encouraged workers to retain assets in the plan. Amended plans in the past to facilitate rollovers into the plan, including rollovers into the plan after separation (what I have historically called asset aggregation/consolidation). Encouraging distributions likely increases leakage.”

“The process to roll from a former employer's plan to a new employer’s plan can be exceedingly complex,” noted one reader. “Individuals have to complete the paperwork required by BOTH the distributing plan and the receiving plan. There is no standardization in the forms or procedures among plan service providers. Distribution packets range from single documents of a few pages to multiple documents totaling 15 pages or more. Forms typically contain language and questions that the average American worker does not understand. Although human resources staff may offer assistance with the requirements of their own company’s plan, rarely can they help with the other plan involved in the transfer. That leaves the employee bearing the burden.”

“While in many instances it is beneficial for employees to consolidate their 401(k)s, there are equally as many reasons not to,” noted another. “Logistically it makes sense but economically it may not. Oftentimes IRAs attach fees great than former employers. But IRAs and their added flexibility have their upside too. Really depends on the participant and their particular circumstances.”

“I wish the rollover over process would be more automated. Some recordkeepers have set-up a process where they indicate the termination date and the participant can call and request the rollover, no forms needed. This is the most efficient process and I wish it were standard in the industry.”

Another explained: “I tell people it comes down to 3 main things: Funds/Performance, Fees and Convenience.”

“The entire industry should make rollovers easy (like ACAT transfers). One form to use for all recordkeepers. Money moves electronically by ACH.”

“Hard to get participants to understand I can’t authorize their rollover. They need to do some work themselves and most of the time they aren’t interested. Item number 1,001 on their top 1,000 things to do.”

“My wife has multiple 401(k)/403(b) accounts, and it took me about a year to consolidate them all –  many recordkeeper procedures in this regard are antiquated and cumbersome.”

“So much paperwork to fill out when rolling over!”

“The process is more complicated and confusing than it needs to be.”

Not everyone agreed, however. One reader explained simply: “It’s. Not. That. Hard.”

Thanks to everyone who participated in our NAPA Net Reader Poll!

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