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October 31, 2013 at 11:00 AM
The Treasury Department is gearing up to release guidance that would make it easier for plan sponsors to conduct rollovers in an effort to mitigate “leakage,” and also plans to issue final regulations on hybrid plans, like cash balance plans.
According to Mark Iwry, Treasury’s Deputy Assistant Secretary for Retirement & Health Policy, coming guidance on rollovers “would make it easier for a plan sponsor to accept a rollover from other qualified plans and IRAs,” Iwry said Tuesday at the American Society of Pension Professionals and Actuaries’ annual conference at National Harbor, Md., just outside Washington. This would help make “leakage” from retirement plans “less likely.”
A recent “State of the Retirement Industry” report by New York Life found “leakage” from 401(k)s to be a major problem. The report found that the average contribution rate for a participant who takes out a loan from their 401(k) is 5.63%, compared with 7.23% for participants without loans. Also, more than two-thirds of participants with an outstanding loan balance who leave their employer will take a cash distribution from their retirement plan rather than paying back the loan. Both are characterized as “leakage” from plans.
A Principal Financial spokesperson said that the company “supports efforts to make it easier for plan sponsors to accept rollovers and for participants to roll over their retirement assets into the new employer-sponsored plan,” and the company “looks forward to the opportunity to review and provide comment on any proposed regulation.”
“At long last,” Iwry said at the ASPPA event, Treasury plans to issue its final regulations on hybrid plans, such as “cash balance pension plans and similar arrangements,” which “have taken longer than we’d hoped.”
