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Why 401(k) plan sponsors should say 'buh-bye' to former employees

Leave the nanny state idealism to the government. There’s no reason why companies should continue to burden themselves with ex-employees’ retirement assets. It’s time for those who leave employers to act with self-responsibility (and self-interest).

By Chris Carosa | Updated on June 29, 2011

There are two types of people in the world: those who believe people can fend for themselves and those who think they can’t. If you fall into the latter category, read this article are your own risk.

I recently published an article where I interviewed several financial professionals. In it, they discussed the increased fiduciary liability imposed on 401(k) plan sponsors when former employees opt to leave their assets in their old 401(k) plan rather than roll over those assets into an IRA. The article (“Ex-Employees Who Don’t Rollover – Will 401k Fees Increase Plan Sponsor Liability?” Fiduciary News, June 28, 2011) noted most financial planning textbooks suggest employees should take their retirement savings out of their old company’s plan. It also acknowledged this adage remains controversial.

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