While clearly that works against savers' best interests, it also hurts sponsors' interests. 

According to testimony from representatives of the Committee on Investment of Employee Benefit Assets, which represents sponsors of the country's largest defined contribution plans, 90 of sponsors favor keeping terminated employees' assets in their plans. 

Doing so keeps plan costs down, keeps individual enrollees' administrative costs down, and assures assets will be guarded by ERISA's fiduciary standard. 

Yet only a quarter of sponsors represented by the CIEBA have a program in place to encourage retention of a terminated employee's assets. 

A "low corporate priority" and concerns about fiduciary liability and cost help to explain the disconnect, said Robert Hunkeler, former chair of the CIEBA. 

To address the problem, Hunkeler says, the DOL can help "create an environment that supports plan sponsors' efforts to encourage terminating participants to leave asset in their plan."

He suggested a DOL-led participant outreach program to help educate employees on the value of leaving assets in plan, and reassurances from the DOL that sponsors' efforts to keep terminated employees in their plans would be recognized as participant education by the regulator, and not investment advice that could expose sponsors to fiduciary liability. 

He also said improved guidance from the DOL on annuities and lifetime income options in 401(k) plans would helps sponsors more readily incorporate the feature.

That would "encourage terminating participants to leave their assets in the ERISA-covered plan system," testified Hunkeler.

The council also heard testimony on the impact that loans and hardship withdrawals have on 401(k) balances and how best to perhaps discourage pre-retirement withdrawals. Its report included advice it heard on this front for sponsors. Some of the highlights:  

• Sponsors could discourage or disallow hardship withdrawals until all loan options have been exhausted. 

• Sponsors could ensure that participants understand that when taking a hardship withdrawal, both their contribution and matching contributions stop for six months.
• Sponsors could automatically re-enroll participants at the end of the six-month hardship period.
• Sponsors could disallow the employer match as a source for loans or withdrawals until retirement.
• Sponsors could allow loans to continue after termination of employment and allow the initiation of new loans after termination. 
• Sponsors could reduce the number of loans that participants can take at any one time.