Every plan sponsor knows the feeling, employees come and go, but their 401(k) balances often stay behind like unpacked boxes from a move three years ago. It seems harmless, even administrative convenience at first. Then reality hits: more accounts, more notices, more fees, more fiduciary responsibility, and more opportunity for something to go wrong.
The problem isn’t personal. it’s structural. Former employees still count when calculating audit thresholds, per-participant fees, disclosures, and cybersecurity exposure. They remain beneficiaries of plan decisions long after they’ve stopped badge-swiping into the building. And if there’s uncashed checks or missing participants? That’s your problem too.
Encouraging former employees to roll over or cash out (within the rules, without advice, and without coercion) isn’t about pushing people out, it’s about plan health. A streamlined participant base means:
· Lower administrative burden
· Reduced audit costs
· Fewer abandoned accounts and lost participants
· Less fiduciary risk on stale records
A 401(k) plan is not a storage facility. When former employees leave their accounts indefinitely, sponsors shoulder ongoing responsibility without the ongoing relationship.
Helping people transition their savings cleanly and efficiently isn’t just housekeeping — it’s good governance. And sometimes, the best way to take care of a retirement plan is to help those who’ve already walked out the door keep walking, right into their next account.