In an effort to help retirement plan sponsors shed plan participants who can't be located or who are nonresponsive,
LPL Financial has signed a deal with Millennium Trust Co. to force small accounts into a safe harbor while ensuring that those sponsors have met their fiduciary responsibility.
Announced this month, Millennium's automatic rollover service will be added to LPL's Worksite Financial Solutions retirement planning platform.
About 20% of plan participants served by sponsors who work with LPL can't be located or are nonresponsive, yet Labor Department regulations require plan sponsors to ensure a safe harbor for rolling over distributions to individual retirement accounts.
Sponsors who follow the Labor Department rules thus satisfy their fiduciary duties under the Employee Retirement Income Security Act of 1974.
“The safe harbor issue is a significant problem for plan sponsors,” said Adam Sokolic, senior vice president of
LPL Financial Retirement Partners. “Everything at Worksite is measured to move the needle for every plan sponsor we work for.”
Worksite Financial Solutions is part of Financial Retirement Partners, the LPL division that focuses on retirement plans. Worksite includes a program called Employee Transition Solution, which involves a team of licensed representatives at a call center in Charlotte, N.C., who work with individuals facing a transitional event such as a job change.
LPL seeks to identify those individuals with about $200,000 in investible assets or more and encourage them to work with one of the large independent broker-dealer's 13,563 registered representatives or financial advisers. Individuals with between $5,000 and $200,000 in assets receive advice about what to do with their IRA rollovers from the call center's licensed reps.
IRAs under the $5,000 mark get sent to Millennium.
“It's really hard for independent advisers to work with lower-balance accounts. They need a supportable business model,” Mr. Sokolic said.
Millennium Trust's job is to search for those individuals who can't be located or who are nonresponsive and reunite them with their money, said Terry Dunne, managing director of automatic rollovers for the firm.
Millennium Trust provides automatic rollovers to about 250 large companies and organizations, including Dell Inc. and the YMCA.
Millennium's scalable technology for capturing large numbers of formerly unresponsive plan participants is what makes the company's business model work, Mr. Dunne said.
Confirmation of found participants goes to plan sponsors, and Millennium sends a welcome kit to the individuals with information about how their IRA came to be placed at Millennium Trust.
Millennium charges a "modest" annual fee to the participant, who can decide to roll over or distribute elsewhere, Mr. Dunne said.
However, about 80% of participants stay with Millennium, he said.
“We're the caboose or tail end for those situations with missing or nonparticipating participants, which is difficult for the plan sponsor. We offer a solution for these sponsors through LPL's larger platform,” Mr. Dunne said.
