Of the possible rollover actions to take upon employment termination, leaving money in an employer’s defined contribution plan is the most common choice among recent retirees and pre-retirees, according to a new survey.
LIMRA, Windsor, Conn., published this finding in a summary of results from a survey, “Keys to Success in the Rollover Market,” that polled 1,177 respondents, ages 55-70, who have who have at least $10,000 in their DC plan accounts. The report aims to understand the factors (including participant and provider characteristics) that determine whether individuals will choose to keep their DC plan money with the plan provider.
Compared to LIMRA’s previous rollover study, the proportion staying in the plan has increased, possibly due to the 2008-2009 market crash and uncertain economic conditions leading some individuals to defer taking action, the survey surveys. A greater tendency to leave money in the plan implies that more assets will be available to providers deploying in-plan retention strategies
The survey adds that retained out-of-plan (rolled to retail) individuals are significantly more likely than others to have had existing IRA accounts, investment products, or brokerage accounts with the plan provider. In contrast, those retained in-plan are no more likely than those who were not retained to have had other products and services with the plan provider. However, this money could be at risk, the survey finds.
When a participant decides to stay with their current plan provider (either through a retail or institutional relationship), retention exceeds 60%, the survey says. Among retirees and pre-retirees, only 9% were retained out of the plan, and 28% were retained in the plan and committed. Another 26% left the money in the plan but were at risk of moving money out.
Retirees and pre-retirees who have contributed to their DC plans for 20 years or more are significantly more likely than others to leave the money in the plan and remain committed to doing so, the survey says.