Moving Retirement Plan Assets

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Today we will be discussing strategies for encouraging ex-employees to move their retirement plan assets.

There are no rules that enable a plan sponsor to compel an ex-employee to transfer their assets out of a company-sponsored 401(k), regardless of whether the individual has another option. The Department of Labor treats all plan participants equally, regardless of their employment status.

However, some plan sponsors prefer not to retain ex-employees' balances in their plans. They encourage these individuals to consider moving their assets by regularly reminding them of the associated benefits:

Consolidation of retirement assets, which simplifies portfolio management and reduces the risk of losing track of accounts. Increased portfolio options, since an IRA offers a broader range of investments compared to a company-sponsored retirement plan. Lower fees tied to individual portfolios. In an IRA, any fees are solely based on the individual's assets, unlike in a retirement plan where one's investment contributes to the group's overall fees.

By consistently emphasizing these benefits, plan sponsors enhance the chances that ex-employees will transfer their balances. Some sponsors even collaborate with a financial advisor who actively informs these ex-employees about the advantages of moving their assets.

A consistent strategy to persuade participants to transfer their assets can achieve this objective, even though it's not possible to require them to do so.

For more information and strategies around ex-employee assets, don't hesitate to contact us today.

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