For employers, maintaining lower-balance accounts can be an expensive regulatory burden.
Vanguard’s report highlighted one possible solution to cashouts that it will offer plan sponsors within a few months: A system through Retirement Clearinghouse to automatically transfer 401(k) balances from one employer to another, regardless of which company acts as the record-keeper — such as from Vanguard to Fidelity Investments. Retirement Clearinghouse’s website says its service would involve a fee of $35 to $50; Vanguard said it will be available to plan participants for “a nominal fee.”
That could have a big impact. EBRI’s 2019 report projected that it could save $1.5 billion for workers with balances of less than $5,000 over the course of 40 years. Employees between the ages of 25 and 43 in 2019 were projected to have an additional $659 billion in retirement savings.
This article was provided by Bloomberg News.