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WINDSOR, Conn., Dec. 7, 2011 — A new LIMRA study revealed that retirees and pre-retirees who are proactively contacted by their retirement plan provider around the time they leave their employer are twice as likely to keep their retirement plan assets with the plan provider.

“With more than $400 billion per year rolling out of employer-sponsored retirement plans and into IRAs, plan providers are looking for ways to keep these assets under management,” said Matthew Drinkwater, associate managing director, LIMRA Retirement Research. “Our study found participants who are contacted around the time that they retire or leave their employer were much more likely to retain their money in their employer-sponsored plan account.”

Not all contact is equal, however. The study found that “active” contact methods (e.g., phone, in-person contact) that allow for personal two-way communication are more effective than “passive” methods such as postal mail or email. Plan providers should consider expanding their call center staff, rather than expanding the retention program’s mailing budget, to effectively reach out and retain plan participants.

While initial retention is important to plan providers, it doesn’t eliminate the risk of participants deciding to roll over their balances at any time. In fact, the study found that half of stay-in-plan participants were not committed to remaining in the plan and nearly 20 percent said they had not considered their alternatives yet. Furthermore, only 24 percent of retirees and 15 percent of pre-retirees who cashed or rolled their money out of the plan invested the money with that same plan provider. Consistent with prior LIMRA studies, mutual funds are the most commonly selected destination for rollover assets, especially among higher-balance participants.

There are other factors that can play into whether a participant remains in their plan:

“Time is of the essence,” noted Drinkwater. “As we have seen in prior studies, half of all assets represented by those surveyed were distributed within 12 months. It is critical to engage retirees and terminated pre-retirees as early as possible to have a chance of retaining their assets.”

The survey, conducted in the spring of 2011, included 1,170 retirees and pre-retirees (aged 55-70) who terminated with their employer over the last three years, were involved in making financial decisions for the household, and had at least $10,000 in their DC plan accounts as of the time of retirement/termination.

LIMRA Contacts:

Donna G. Sullivan, 860-285-7875, dsullivan@limra.com
Catherine Theroux, 860-285-7787, ctheroux@limra.com

 

About LIMRA

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.

Media Contacts

Catherine Theroux

Director, Public Relations

Work Phone: (860) 285-7787

Mobile Phone: (703) 447-3257

ctheroux@limra.com

Brooke Lacey

Public Relations Specialist

Work Phone: (860) 298-3920

Mobile Phone: (413) 530-6184

blacey@limra.com