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ERISA panel investigating employer-sponsored plan rollovers

The U.S. Department of Labor’s ERISA Advisory Council’s announced this month that it is looking at why people are moving their retirement assets out of employer-sponsored plans such as defined benefit plans. The amount of retirement dollars moving out of these plans has gotten their attention.

Much of this transfer of assets is from Baby Boomers retiring and moving their retirement savings out of these plans and into individual retirement accounts and other investments. Reportedly, $324 billion was rolled over into IRAs in 2013. That is 17 percent more than the year before and an increase of 60 percent over the past 10 years.

According to the ERISA Advisory Council, it wants to investigate what companies tell their employees when they leave about their retirement plans and “whether the quality of the participant’s decision-making can and should be enhanced by communication or other plan design features from the plan sponsor.”

In the absence of clear communication by employers, workers to retire or leave their jobs may get advice from less-than-reliable sources. In a recent investigation by Bloomberg, former employees of major companies including AT&T, Hewlett-Packard and United Parcel Service reported that sales representatives convinced them to roll their 401(k) plans into IRAs that were not suitable for their investment needs.

The advisory council says it is looking at a number of things. These include how regulations, fees, investment options and other factors, including sponsors’ fiduciary obligations, impact the movement of assets when employees change jobs.

The council says it hopes to better understand when rolling over assets is best for individuals and when it is not. It hopes to determine if there are “positive steps that can be taken to further encourage individuals to stay in the system if it makes sense for them to do so.”

Long gone are the days when people stay with a company from their first job to retirement. Workers change jobs more than ever, whether because of layoffs or to progress in their careers. Moreover, Americans are increasingly choosing to forgo an office job to work independently. When employees change jobs or retire, it is wise to do some homework and possibly seek financial and perhaps legal advice to determine the best option for their employer-sponsored savings plan. People work hard to build a nest egg and need to protect it.

Source:  Benefits Pro, “ERISA panel to dig into rollovers” Nick Thornton, Jul. 11, 2014

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