Shepherding Participants from 401(k)s to Rollover IRAs

Posted on in categories General , News Update , Newsletter tagged 401k , 401ks , 403bs , 457s , IRA , IRAs , pension plan , pension plans , Rollover IRA , Rollover IRAs

The economic impacts from the COVID-19 pandemic continue to be felt across the U.S., and employees and businesses are bearing the brunt of the challenges. As many businesses partially open or close entirely, plan sponsors are faced with managing numerous employee furloughs, terminations, or retirements. With this changing economic environment in mind, ABG offices throughout the country are proactively partnering with plan sponsors and financial advisors to shepherd participants from employer-sponsored retirement plans, including 457s, 401(k)s, 403(b)s, and pension plans, to rollover IRAs.

The Benefits of a Rollover IRA Strategy

Developing a proactive rollover IRA strategy offers a number of benefits for plan sponsors, financial advisors, and participants:

From the plan sponsor perspective:

Retirement plan costs are typically borne by plan sponsors as per-participant fees. As employees leave a company, transitioning them from an employer-sponsored retirement plan to a rollover IRA lowers plan administration expenses for the plan sponsor. This may be a helpful expense reduction during this challenging time as many companies restructure or reconfigure their workforces. In the instance of involuntary terminations, transitioning the participant from the company retirement plan may be a prudent off boarding protocol. This also proactively prevents the administrative burden of having to track down former employees still in the plan.

From the advisor perspective:

Rollovers from employer-sponsored plans help advisors grow their businesses significantly. According to the Investment Company Institute, 59% of traditional IRA-owning households in 2019 included rollovers from employer-sponsored retirement plans, and with higher median balances than IRAs that did not include these qualified plan rollovers ($120,000 vs. $35,000).*

From the participant perspective:

Rolling over into an IRA provides numerous benefits, including:

  • Portability of Assets: The portability of assets and the potential for consolidation of retirement assets as other career transitions occur is an important consideration for participants. The average number of jobs for an American during their working life is 12, per 2019 Bureau of Labor Statistics data. Keeping track of retirement assets through job changes is key, and a rollover IRA provides a focal point for retirement asset consolidation.
  • Greater Control: Typically, when an employee leaves a job, they prefer to take their retirement assets with them. Leaving retirement assets at the former employer could result in investments in funds they did not choose if the plan sponsor refreshes investment selections or switches plan providers.
  • Protection: IRAs are also now protected from creditors and bankruptcy by up to $1 million in most states as well as federally.
  • CARES Act Provisions Still Apply: All COVID-19 CARES Act withdrawal provisions also apply to IRAs. Participants will not lose that flexibility when rolling over into an IRA.

A Compelling Opportunity

Yannis Koumantaros, CFO of ABG member firm, Spectrum Pension Consultants, and co-founder of an innovative fintech IRA company, is seeing robust demand for his fintech firm’s rollover IRA program from both plan sponsor clients and financial advisor partners.


“It’s the biggest trend we are seeing among the clients we serve and a way to help our plan sponsor clients cut costs and our advisor partners grow their business. For retirement plan participants who are leaving a job, it provides them with a timely solution and keeps them on track with their retirement goals.”

From Yannis’s perspective, staying ahead of trends like these and providing proactive solutions to the issues plan sponsors face during the pandemic and beyond is an important priority for Spectrum Pension Consultants and other ABG member firms across the country.

ABGSW is Here to Help

Whether you are a plan sponsor or a financial advisor working with plan sponsors, consider ABG your resource for timely solutions as we move forward in 2020 and into 2021. We are here to help. Contact your local ABG representative to learn more.

*The Investment Company Institute is a mutual fund industry trade organization

Challenging times require making tough decisions, quickly. You can count on us to keep you briefed on new funding sources, compliance updates, planning resources and more essential updates regarding the COVID-19 health crisis. Access REDW’s COVID-19 Resource Hub.