One of the things that has always amazed me about the retirement plan business is how we can manage billions of dollars electronically, yet moving a participant\u2019s 401(k) account from one retirement plan to another can sometimes feel like we\u2019re still living in 1987.<\/p>\n
Treasury and the IRS are trying to move things forward with guidance facilitating electronic rollovers. That\u2019s a positive development because rollovers should be easier, faster, and safer for participants.<\/p>\n
Think about the traditional process. A participant leaves an employer and wants to move their account. Depending on the providers involved, there can be paperwork, signatures, telephone calls, checks mailed to participants, checks mailed to custodians, and the inevitable question of whether somebody filled everything out correctly.<\/p>\n
Every additional step creates another opportunity for something to go wrong.<\/p>\n
Making direct rollovers easier electronically should help reduce friction and encourage participants to keep retirement money where it belongs: in the retirement system.<\/p>\n
That\u2019s important because the worst result is often a participant receiving a check, seeing a pile of money, and deciding that the new television or vacation suddenly looks more attractive than retirement 25 years from now.<\/p>\n
Of course, electronic doesn\u2019t mean plan sponsors and providers can stop paying attention. Rollovers still have rules. Plans still need proper procedures. Participants still need appropriate notices, and administrators accepting rollover contributions still need to make sure those rollovers are permissible.<\/p>\n
Technology doesn\u2019t eliminate compliance.<\/p>\n
What it can eliminate is unnecessary paperwork and unnecessary opportunities for mistakes.<\/p>\n
I\u2019ve always believed that retirement plans should be easier for participants to understand and use. Too much complexity discourages people from doing the right thing.<\/p>\n
If electronic rollovers make it easier for participants to move retirement savings directly from one retirement account to another without checks getting lost in the mail or paperwork sitting on somebody\u2019s desk, that\u2019s progress.<\/p>\n
Sometimes modernization in the retirement plan business simply means finally doing something the way everyone assumed we were already doing it.<\/p>\n
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