Aon Hewitt Urges U.S. Employers and Providers to Encourage Workers to Keep Retirement Dollars in the Employer-Provided System

  Aon Hewitt Urges U.S. Employers and Providers to Encourage Workers to Keep
              Retirement Dollars in the Employer-Provided System

Cashing Out or Rolling Retirement Balances into Other Vehicles Can Place
Employees' Retirement Savings at Increased Risk

PR Newswire

LINCOLNSHIRE, Ill., April 4, 2013

LINCOLNSHIRE, Ill., April 4, 2013 /PRNewswire/ --A report just released by
the U.S. Government Accountability Office (GAO), "401(k) Plans: Labor and IRS
Could Improve the Rollover Process for Participants," showed that the current
401(k) rollover system is complex, confusing, lacks consistency and favors
moving money into individual retirement accounts (IRAs). Aon Hewitt, the
global human resource solutions business of Aon plc (NYSE:AON), agrees with
the GAO's findings and recommendations and urges companies to help workers
reach their retirement savings goals by encouraging them to keep retirement
dollars in the employer-provided retirement system. According to Aon Hewitt,
employees who roll plan balances into retail accounts without fully
understanding their options significantly increase their risk of not meeting
their financial needs in retirement.


"The GAO's report brings to light very real problems with the current rollover
system," said Alison Borland, vice president Retirement Solutions and
Strategies at Aon Hewitt. "Keeping retirement dollars in the employer-provided
system is paramount to helping workers ensure that they are adequately
prepared for retirement, and we have long been concerned about the difficult
process workers face when trying to roll one employer 401(k) plan into
another. Aon Hewitt believes the GAO recommendations for improving the
rollover process would go a long way to ensure that workers' best-interest and
financial security is a top priority for employers and plan providers."

According to Aon Hewitt, many workers do not intuitively understand the
advantages of keeping retirement savings dollars in the employer-provided
system and do not have a trusted source of clear, understandable, unbiased
education about their options. Consequently, it is crucial for employers to
educate and communicate with employees about the benefit of participating in a
qualified plan—and to ensure the information being provided to employees by
third parties with whom they have a relationship is fair, unbiased and in the
best interest of plan participants.

Employees who choose to roll retirement money into an IRA risk losing key
features from within the employer-provided system, which can significantly
impact long-term savings goals.

These benefits include:

  oEnhanced purchasing power—Because larger defined contribution (DC) plans
    have hundreds or thousands of participants and assets of tens of millions
    of dollars or more, enhanced purchasing power allows them to offer
    institutional class investment products to employees at a lower cost for
    similar products than an individual would purchase on their own in an IRA.
  oAccess to unbiased tools and resources—These tools often include
    education, modeling tools, online advice, managed accounts, lifetime
    income solutions and access to experienced phone representatives. Like the
    investments, these are usually offered a much lower cost than what is
    available to individuals outside of the employer system. In addition,
    employees who also have a defined benefit (DB) plan with their employer
    benefit from integrated modeling tools that allow them to better manage
    their retirement savings.
  oEmployer expertise—By participating in a qualified plan, workers benefit
    from the fiduciary oversight and expertise of the plan sponsor and often
    outside experts in areas such as selecting investment options and
    reviewing plan design alternatives.

To encourage employees to keep their retirement savings in the
employer-provided system, Aon Hewitt encourages employers to take the
following steps:

Ask the right questions. When employers provide access to participants by any
third parties, it is crucial that they understand the information and guidance
that will be provided. Ask the provider to quantify the revenue generated from
the different options available at retirement or termination in order to see
if there are any business conflicts. Ask about the compensation and goals of
the individuals who will be interacting with participants. Ask about the
disclosures that will be provided regarding fees. Review agreements to
determine what marketing messages can and will be sent directly to
participants, and ensure that there is the appropriate level of comfort with
those messages. Providers endorsed by the plan sponsor receive a heightened
level of trust from workers, so it is important to make sure that trust is
well placed.

Educate and communicate. Make sure employees have access to the right
information about their options, and that they receive it at the right time.
This means not only at the time of retirement or termination, but well in
advance to help with planning. Use multiple channels, so that employees have
options across self-service vehicles, such as online information, phone, or
in-person support.

Make it easier for participants to roll over money into qualified retirement
plans. The current process for rolling plan balances from one
employer-provided plan to another can be complex and confusing, requiring a
significant amount of paperwork and time by the employee. Employers and
providers need to work together to make the process easier for participants.

"Most plan sponsors are indifferent when it comes to whether they want former
employees to keep money in the plan or exit. Making it simple to roll dollars
to other plans is not high on the priority list," added Borland. "Providers do
not have an incentive to make it easy for money to leave them—they are losing
a revenue source. We need to turn that attitude around and work together to
act in the best interest of workers."

To simplify the process Aon Hewitt suggests plan sponsors and providers work
together to make the process less arduous for employees. For example,
periodically, and at an employee's termination, employees could be provided
with resource materials or an educational campaign explaining the benefits of
employer-provided plans, with clear and simple instructions on how to roll one
plan into another. Plan sponsors could post this information on provider web
sites along with phone numbers and web links for help.

Maintain an attractive investment line-up. One of the main reasons that IRA
providers encourage rollovers out of an employer plan is because of lack of
breadth of available investments compared to an IRA.Plan sponsors can help
employees make the most of their retirement dollars by offering low-cost
institutional core investment options, complemented by a self-directed
brokerage (SDBA) option that provides access to the broad universe of mutual
fund alternatives.

Offer an attractive retirement income option for those nearing retirement. Aon
Hewitt's research shows that 29 percent of plans currently provide employees
with some form of retirement income solution, either inside, or outside the
plan. Including easy and flexible monthly payments, income planning and
investment help and/or annuity options would give employees nearing retirement
an added incentive to stay within the employer-provided system.

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About Aon Hewitt
Aon Hewitt is the global leader in human resource solutions. The company
partners with organizations to solve their most complex benefits, talent and
related financial challenges, and improve business performance. Aon Hewitt
designs, implements, communicates and administers a wide range of human
capital, retirement, investment management, health care, compensation and
talent management strategies. With more than 29,000 professionals in 90
countries, Aon Hewitt makes the world a better place to work for clients and
their employees. For more information on Aon Hewitt, please visit

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management,
insurance and reinsurance brokerage, and human resources solutions and
outsourcing services. Through its more than 61,000 colleagues worldwide, Aon
unites to empower results for clients in over 120 countries via innovative and
effective risk and people solutions and through industry-leading global
resources and technical expertise. Aon has been named repeatedly as the
world's best broker, best insurance intermediary, reinsurance intermediary,
captives manager and best employee benefits consulting firm by multiple
industry sources. Visit for more information on Aon and to learn about Aon's global partnership and shirt
sponsorship with Manchester United.

Media Contacts:
MacKenzie Lucas, 847-442-2995,
Maurissa Kanter, 847-442-0952,

SOURCE Aon plc

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