Another arrow in the quiver for 401(k) auto portability.
Retirement Clearinghouse teamed with Boston Research Technologies to conduct research on stale address records in employer-sponsored plans.
The study found that a participant move created a stale address record for one out of every five accounts simply because the participant did not inform their former employer when they relocated.
In addition, the survey found that 11 percent of all terminated account records have an outdated address, and most of these missing participant accounts, especially those with balances below $10,000, belong to Millennials.
The study’s findings also indicate that 67 percent of stale address records for missing participants can be matched with an active participant record in the systems of the record-keepers that sponsors already utilize to administer their plans—and the active participant records are very reliable (92.6 percent).
Active participant records are an untapped source of verified, accurate addresses that sponsors can leverage to help mitigate the growing problem of missing participants in retirement plans.
“High workforce mobility and the fact that participants frequently forget to update their contact details with previous employers and plan record-keepers are twin drivers of missing participants in employer-sponsored plans,” Warren Cormier, Founder and CEO of Boston Research Technologies, said in a statement. “Demographic trends revealed in the survey suggest the problem could get worse before it gets better.”
The study, titled “The Mobile Workforce’s Missing Participant Problem,” also found:
- Millennials are more likely than others to be missing participants.
- Low-income households are twice as likely to have missing participants.
- A significant majority of participants—60 percent—would prefer an automated process to update their addresses or consolidate their prior-employer plan accounts in their current-employer plans.
- One-third of the participants in the study, including half of the Millennials surveyed, learned of a retirement savings account with a previous employer’s plan that they didn’t know they had.
- The strongest predictor of the account not being lost was the respondent’s knowledge of how to contact the company holding the account—accounts held by respondents who reported being able to do this were almost 7 times less likely to be lost.
“Terminated participants are a dynamic problem tied directly to the growing frequency of job-changing among defined contribution plan participants,” Spencer Williams, Founder, President, and CEO of Retirement Clearinghouse, added. “At a time when the Department of Labor has been placing more emphasis on missing participants during plan audits, one simple solution is to strongly encourage participants to take their accounts with them to their new-employer plans.”