Automatic rollovers of small, stranded 401(k) savings accounts are, on the surface, helpful for plan sponsors to keep their plans lean and healthy. However, “on the surface” is the key part of the previous sentence.
While sponsors can deploy automatic rollovers (AROs) to kick small 401(k) accounts out of their plans, the participants who hold those accounts don’t benefit at all — in fact, if they don’t cash out their savings entirely, they can be stuck with multiple accounts that incur fees that deplete their savings over the long term. By continuing to engage in practices that, though legal, could be harmful to participants, sponsors may be opening themselves up to fiduciary liability.
