Three of the biggest 401(k) administrators have teamed up to automatically reconnect workers with savings left behind at an old employer.
This is where the new consortium of plan administrators is focusing their efforts. When a worker changes jobs and has $5,000 or less in their account, Fidelity, Vanguard and Alight will automatically shift 401 assets to the employee's new workplace plan when possible. Basically, the money will follow the worker.
And it's not just 401 balances — the transfers will also apply to similar workplace plans outside the private sector, including 403, 401 and 457 plans. Women, minority and low-income savers stand to benefit most, since they disproportionately have account balances of less than $5,000, Gray said.One cash-out during an investor's life raises the odds they will run short of money in retirement by 11.4 percentage points, on average, to 30.4%; two or more raises the odds to 46.
The firms account for roughly 44 million workplace retirement savers, or roughly 40% of the market. They collectively work with 48,000 employer-sponsored retirement plans. Retirement Clearinghouse serves as the engine facilitating the transfers among administrators and will manage day-to-day operations, Gray said. The companies charge a one-time fee to workers for the service: 5% of the account balance, capped at $30. Accounts with less than $50 aren't charged.
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