401(k) Specialist Issue 2 - 2023 - 41

401(k) PROVIDER PERSPECTIVE
* In the last two years, 2021-2022, those
figures have further declined to an annual
rate of 20.7%, just slightly above the overall
level of cashouts across all age groups
Clearly, portability seems to be working
for this mega plan-reducing overall cashout
leakage levels by 57%, vs. prior experience.
Highway Through the 'Danger Zone'
Despite the dramatic reductions that
portability facilitates, some cashout leakage
seems to be inevitable in a voluntary system,
where true financial emergencies will necessitate
access to these savings. But perhaps the
experience of our mega plan sponsor points
to a cashout leakage " floor " of sorts-where
20% annual leakage, vs. 40%+ leakage, could
easily become the norm if sponsors and
providers simply choose to act.
This, in fact, seems to be the conclusion of
" While the data
concerning cashout
leakage is uniformly
bleak, there is now
compelling evidence
that retirement
savings portability
could dramatically
reduce leakage by
almost 60%. "
an author of the new leakage study, John G.
Lynch, Jr., who, in a recent interview " encourages
more recordkeepers to join the Portability
Services Network, which would enable
employees with smaller balances to roll over
401(k), 401(a), 403(b) and 457 accounts to a
new employer's plans as they change jobs. "
Referencing plan sponsors, Lynch pointedly
states: " If the employer really cares about
their employees, they should care about
them when they're on the way out the door
as well. "
Indeed, if retirement savings portability
is fully embraced by the industry, it may represent
a much-needed highway through the
" danger zone " of unnecessary cashout leakage,
increasing retirement security for millions
of job-changing 401(k) participants.
Tom Hawkins is Senior Vice President, Marketing
and Research with Retirement Clearinghouse. He
oversees all critical operational aspects of this
area, including RCH's web presence, digital marketing,
and plan sponsor proposals.
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ISSUE 2 2023 | 401kSpecialist.com
41
Issue 2, 2022 |
401kSpecialist.com
CHANGING
THE
'It' Advisor Tyrone Ross Jr.
on key industry issues and
his next endeavors
OF
401(k)

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401(k) Specialist Issue 2 - 2023

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