Tis the Season. Consolidation Season.

Written by Steve Scott

In a year filled with uncertainty, moving your orphaned retirement savings to your current employer’s plan keeps your accounts in one place and makes it easy to manage it more effectively and with more certainty. Consolidating older, stray plans benefits both the participants by making it easier, and the employer, by increasing participation levels that open up more investment options. It’s a win-win. And we all need that after the year we’ve just had.

As we enter into the holiday season, and reflect on the year, it seems obvious that 2020 has been an insanely uncertain year. This year is ending with a lot of open questions, about the results of the election, the progression of the pandemic, and bounce back of the job market. It was the kind of year that makes you reflect a little as the year comes to a close. And what we found, is that uncertainty sometimes sparks a need to take action. And that’s not all bad.

Among all this doom and gloom, there is an upside. We saw some very positive outcomes for many of plan participants. Especially for those who were inspired by these uncertain times to take steps to get their retirement accounts in order. They started by asking a lot of questions when market volatility spiked in the spring. Some were inquiring about access to loans and retirement funds due to job issues. Others were simply trying to assess risk levels and ensure their allocations were appropriate due to the sudden bear market. The questions were good. And the answers were all contingent on the ease of accessing those accounts.

Make it Easier to Manage Your Investments

When investment monies are in multiple retirement accounts, spread across various former employers, each with different investment offerings, making any broad scale changes can be difficult. When retirement accounts are combined, investments can more easily be aligned to meet both short-term and long-term needs of the participants.

Who Should Consider Consolidation of Retirement Accounts

I want to be clear, this message is not for people who have outside IRA accounts that are being actively managed. It is not for those who remain engaged in the process. If participant monies are in a place where they are comfortable, have easy access and the strategy is being proactively managed, this is not a beneficial strategy.

This message is particularly relevant for retirement plan participants who
• moved around in their careers
• accumulated orphaned 401(k) plans and IRAs
• have a portfolio of forgotten plans or ones on auto-pilot, at best

This is the group most vulnerable when dealing with how this volatile year impacted the management and/or access to your funds. The craziness of 2020 caused us all to assess our situations, especially finances, on multiple levels. For those with a bunch of small, unmanaged and often unsupported accounts, navigating this already challenging year doesn’t have to remain so difficult.

The solution – Consolidate

Participants don’t have to go it alone. In years past, individuals were left on their own to tackle the tough job of tracking down accounts, initiating rollovers and all the paperwork that went along with it. We’re proud to have seen several record keepers that have jumped in to help consolidate participant plans. And even more recently, we have seen numerous employers run consolidation campaigns in 2020, with much success. While the exact process is dependent upon your specific record keeper and support team, my encouragement is to have the conversation.

One could argue that now, more than ever, many of participants with orphaned accounts would benefit from consolidation. As the Department of Labor has always stated, all decisions in an ERISA plan should be made with the participants best interests in mind. RSG takes that fiduciary perspective seriously. We have helped our clients see better results with an organized consolidation campaign.

In the end, the goal of RSG is to help people retire with dignity. The question we pose to our clients is simple—would a significant number of participants benefit from pulling some of these orphaned accounts under their current 401(k) umbrella? And would that positively impact both the participant and the plan? In many cases the answer is yes, participants would gain control and access from consolidation. And yes, higher levels of participation influence positive repricing of the plan.

If you want to understand the options and process consolidating your retirement plans or organizing consolidation campaign, please feel free to reach out to your RSG relationship manager personally and we would be happy to answer any questions you have. In the meantime as we continue navigating this unusual time, the key is to have awareness and control of our situation as much as possible. The idea here is that this is a small step in that direction.