CHARLOTTE, N.C., April 30, 2015 /PRNewswire/ -- Retirement Clearinghouse, LLC has consolidated over 113,000 retirement savings accounts totaling more than $3 billion in assets into existing IRA or 401(k) accounts. The firm is the only independent party that consolidates assets into active 401(k) accounts through plan-to-plan transfers—helping workers save more money for retirement while reducing their expenses, and decreasing fees for plan sponsors by increasing average account balances.
"Account consolidation benefits all parties in the retirement system—plan participants, sponsors, record-keepers and other service providers," said Spencer Williams, President and CEO of Retirement Clearinghouse. "More plan sponsors are promoting and facilitating roll-ins of accounts as a cost-effective way to improve plan performance metrics, as well as retirement outcomes for participants. As this trend gains further momentum, the benefits become more obvious to the industry."
Small Account Issues
Approximately 9.5 million employees who participate in defined contribution plans change jobs every year, according to data provided by the Employee Benefit Research Institute (EBRI). Annually, an estimated 33% of these job changers choose to cash out their retirement savings instead of rolling their balances into their new employers' plans.
Furthermore, after several decades of accumulated activity, more than two-thirds of the workers who haven't cashed out have multiple retirement savings accounts. When this is combined with the effects of auto enrollment, the result is that about 40% of all account balances in retirement plans were below $10,000 in 2012. The presence of numerous small, stranded accounts from former participants leads to higher administrative fees for plans and complex retirement planning for participants.
Automated Account Consolidation Addresses the Issues
Retirement Clearinghouse is helping to solve these issues by facilitating the automated two-way flow of assets into and out of retirement plans. Automating the two-way flow of plan assets has been proven to improve sponsors' average account balances and thereby reduce their expenses.
In addition, account consolidation significantly reduces cash-outs by creating a new default for participants when they change jobs—keeping their assets invested and cutting their administrative fees.
The aggregate benefits of routine, systematic and, in some cases, automatic account consolidation are compelling. EBRI has estimated that a 50% reduction in cash-outs across the system would add $1.3 trillion to consumers' retirement savings over a 10-year period. According to calculations based on Cerulli Associates reports, widespread retirement account consolidation could save consumers $40 billion in administrative and recordkeeping expenses over a 10-year period.
"We are proud to have helped so many retirement plan sponsors and participants achieve better long-term outcomes," said Mr. Williams. "We look forward to enabling more employers and employees around the country to experience the benefits of automated retirement savings portability and account consolidation."
About Retirement Clearinghouse Retirement Clearinghouse, LLC is the leading provider of portability and consolidation services for defined contribution plans, acting as a trusted, unbiased intermediary between plan sponsors, participants, record-keepers and other parties. Retirement Clearinghouse's integrated financial technology, data and information solutions facilitate automated consolidation of small, redundant accounts for sponsors to improve plan performance metrics, and enable participants, regardless of account balance, to seamlessly transport their retirement savings through every phase of their careers.
Retirement Clearinghouse's portability solutions have been proven to cut cash-outs by over 50% and significantly increase average account balances. The firm also offers a domestic call center and specialized assistance designed to enable end-to-end portability and account consolidation, including help with complicated paperwork, uncashed check services and the capability to search for lost and missing participants.
Originally established as RolloverSystems in 2001, Charlotte, N.C.-based Retirement Clearinghouse works with more than 15,000 retirement plans and has helped guide over 900,000 plan participants with more than $12 billion in retirement savings. Retirement Clearinghouse is a portfolio company of The RLJ Companies, founded by Robert L. Johnson. For more information, please visit www.rch1.com.