Switching Jobs? Your 401(k) Balance Could Be Automatically Transferred Under a New Federal Rule

Workers changing jobs could have their retirement savings automatically transferred to plans at their new jobs under a proposed federal rule.

The U.S. Department of Labor is considering allowing Retirement Clearinghouse LLC to run a program that automatically transfers small 401(k) balances into individual retirement accounts when employees leave a job. Then, when they start a new job, RCH would automatically transfer the savings into the new employer’s 401(k) plan.

Why This Matters

This would help solve what Retirement Clearinghouse calls a “cash-out crisis.” Many people cash out their 401(k) savings when they change jobs rather than going through the process of transferring them to a new job. This hurts their long-term savings, the company said in a statement. Spencer Williams, CEO of Retirement Clearinghouse, did not immediately return a call seeking comment.

How the Program Works

The RCH Auto Portability Program rolls over balances of less than $5,000 from the old 401(k) plans into an IRA (here’s a cheat sheet on the difference between the two). The company sends a letter to departing employees tell them their 401(k) will be placed into an IRA unless they respond.

The company uses technology called “locate, match and transfer” to detect when the IRA owner starts a new job. It then moves the money from the IRA into the new job’s retirement plan. Employers and plan providers can sign up for the program.

Dennis R. Nolte, a certified financial planner and vice president of Seacoast Investment Services, said most planners would be happy to be rid of the headache of dealing with small leftover account balances. More programs like this could help make sure retirement savings stay invested in a plan, he said.

Are There Downsides?

Jon L. Ten Haagen, certified financial planner and founder of Ten Haagen Financial Group, said he wouldn’t want a company deciding on its own what to do with his retirement savings. Moving your money into a new company’s 401(k) isn’t always the best choice, he said, because it “may or may not be a piece of garbage.” The company managing the IRA in between jobs may also not make the right investment choices for you, he said.

Companies should educate departing workers about their best options for their retirement savings instead.

“There are many questions to be answered,” Ten Haagen said.

What’s Next?

The Department of Labor is taking comments on whether to allow RCH to take a fee when it transfers money to a new employer’s account without the IRA holders explicit permission. The comment period lasts until December 24.

Starting a new job? Aside from dealing with your old retirement plan, don’t forget these money tasks.

This article originally appeared on Policygenius and was syndicated by MediaFeed.org.

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How Blockchain Technologies Can Enhance Cross-Industry Transparency

Now, blockchain technologies are poised to enhance cross-industry transparency via improvements to charity and donation programs.

I spoke with Changpeng Zhao, CEO of the cryptocurrency exchange company Binance, which runs the Blockchain Charity Foundation (BCF)–a wing of the company that’s devoted to global sustainable development. He shared how blockchain technologies can enhance transparency within a huge range of industries by making donation and charity systems easier to track and understand.

The Trouble with Current Donation Systems

There are so many disparate industries these days that it can be challenging to find any commonalities beyond death and taxes. But here’s one thing most industries have in common: At least some people and organizations within said industries are likely to participate in charity or donation programs.

That’s good news for society, but there’s just one problem: Donation systems notoriously lack transparency, which can lead to corruption and wear down the public’s trust–thereby decreasing the odds that people and organizations will continue to donate to worthy causes.

After piloting disaster relief donations via a campaign for West Japan flood donation, Zhao is intimately familiar with the lack of transparency that pervades so many charity programs.

“It was quite hard to push money to the ultimate beneficiaries–to identify who they are and who needs help,” Zhao says. Because the process of collecting and distributing donations is generally an opaque one, Zhao says not many people can understand where the money goes unless they’re provided with a detailed written report.

“Everyone sees one layer of transaction,” Zhao says. “The people who donated to us trust us to make good use of the money, but they no longer know where the money went until we publish that report.”

Zhao is concerned this can limit people’s willingness to donate. “In addition to being worried that the money may or may not be put to good use, the lack of transparency also reduces the sense of personal achievement,” he says. “If you can see where the money is going, that will help a lot in terms of personal feelings of achievement–so that’s very important.”

All of this helps explain why the BCF is committed to developing a fully transparent charity platform.

Making Charity Programs More Transparent

Zhao and his BCF maintain that employing blockchain technology within the charity ecosystem will yield a more efficient and transparent system and enhance the odds that donations will be distributed to those most in need.

“When it comes to the BCF program, our aim is to focus on transparency through this tracking portal,” Zhao says. “We want a completely transparent system.”

“Looking at the UN Sustainable Development Goals, the first few in the list could all be easily enhanced with a more transparent charity program,” Zhao says. “This increased transparency will prompt people to donate more and that will help a number of the initiatives including poverty, health, quality of education, gender equality and more.”

Rather than advocating for a specific charity, the BCF aims to help all charity initiatives via its blockchain charity platform.

Making Donation Systems More Transparent

In order to establish a fully transparent charity system, it’s necessary to track donations through multiple layers of donors, charity programs, NPOs, local supporters, and the ultimate beneficiaries.

That’s a tall order, but Zhao says Binance’s blockchain donation portal is capable of achieving it.

“As long as all of the transactions stay on-chain (done via cryptocurrency), blockchain tracks everything automatically,” Zhao says. “The job of the BCF portal is to collect the information on the blockchain and present it in an easy to understand manner. You can see the number of transactions of the incoming donations and the number of outgoing transactions for beneficiaries. And in between these two, there could be multiple layers for NPOs, local partners… etc., so we can track all of those in an easy to visualize way.”

The emphasis here is on easy to understand. Revealing oodles of data in and of itself doesn’t enhance transparency; it’s making that data accessible and understandable by all parties involved that provides greater clarity within donation systems.

The Importance of Education

In order to onboard more charitable organizations, governments, corporations, and grassroots communities, Zhao says the BCF first has to educate people about the value of the blockchain and cryptocurrencies.

The foundation is approaching this effort in several ways. For starters, the BCF is beginning to partner with universities and governments to educate teens and university students about cryptocurrency, blockchain, and so on.

“We also try to push very hard for the ultimate beneficiaries to accept cryptocurrency, so that will be a good way [for] people to learn,” Zhao says. “If users receive donations via crypto and these users need to learn about cryptocurrency or require help installing a wallet to receive the donation, there is a high incentive to learn that.”

Zhao is also hopeful that an increasing number of people and organizations from far-ranging industries will get on board with the blockchain in pursuit of a transparent charity platform.

“There [are] a lot more people that understand blockchain… [compared to a] few years ago, so today it is easier to push,” Zhao says. “I think the most significant challenge in expand[ing] BCF’s impact is really just educating people on blockchain. The more people who understand blockchain, the easier it is for BCF to push our impact.”

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Why We Need Women to Have a Larger Role in Innovation

Every once in a while I get a comment from an audience member after a keynote speech or from someone who read my book, Mapping Innovation, about why so few women are included. Embarrassed, I try to explain that, as in many male dominated fields, women are woefully underrepresented in science and technology.

The preponderance of evidence shows that women can vastly improve innovation efforts, but are often shunted aside. In fact, throughout history, men have taken credit for discoveries that were actually achieved by women. So, while giving women a larger role in innovation would be just and fair, even more importantly it would improve performance.

The Power of Diversity

Over the past few decades there have been many efforts to increase diversity in organizations. Unfortunately, all too often these are seen more as a matter of political correctness than serious management initiatives. After all, so the thinking goes, why not just pick the best man for the job?

The truth is that there is abundant scientific evidence that diversity improves performance. For example, researchers at the University of Michigan found that diverse groups can solve problems better than a more homogenous team of greater objective ability. Another study that simulated markets showed that ethnic diversity deflated asset bubbles.

While the studies noted above merely simulate diversity in a controlled setting there is also evidence from the real world that diversity produces better outcomes. A McKinsey report that covered 366 public companies in a variety of countries and industries found that those which were more ethnically and gender diverse performed significantly better than others.

The problem is that when you narrow the backgrounds, experiences and outlooks of the people on your team, you are limiting the number of solution spaces that can be explored. At best, you will come up with fewer ideas and at worst, you run the risk of creating an echo chamber where inherent biases are normalized and groupthink sets in.

How Women in Particular Improve Performance

While increasing diversity in general increases performance, there is also evidence that women specifically have a major impact. In fact, in one wide ranging study, in which researchers at MIT and Carnegie Mellon sought to identify a general intelligence score for teams, they not only found that teams that included women got better results, but that the higher the proportion of women was, the better the teams did.

At first, the finding seems peculiar, but when you dig deeper it begins to make more sense. The study also found that the high performing teams members rated well on a test of social sensitivity and took turns when speaking. Perhaps not surprisingly, women do better on these parameters than men do.

Social sensitivity tests ask respondents to infer someone’s emotion by looking at a picture (you can try one here) and women tend score higher than men. As for taking turns while in a conversation, there’s a reason why we call it “mansplaining” and not “womensplaining.” Women usually are better listeners.

The findings of the study are consistent with something I’ve noticed in my innovation research. The best innovators are nothing like the mercurial, aggressive stereotype, but tend to be quiet geniuses. Often they aren’t the types that are immediately impressive, but those who listen to others and generously share insights.

Changing The Social Dynamic

One of the reasons that women often get overlooked, besides good old fashioned sexism, is that that there are vast misconceptions about what makes someone a good innovator. All too often, we imagine the best innovators to be like Steve Jobs–brash, aggressive and domineering–when actually just the opposite is true.

Make no mistake, great innovators are great collaborators. That’s why the research finds that successful teams score high in social sensitivity, take turns talking and listening to each other rather, rather than competing to dominate the conversation. It is never any one idea that solves a difficult problem, but how ideas are combined to arrive at an optimal solution.

So while it is true that these skills are more common in women, men have the capacity to develop them as well. In fact, probably the best way for men to learn them is to have more exposure to women in the workplace. Being exposed to a more collaborative working style can only help.

So besides the moral and just aspects of getting more women into innovation related fields and giving them better access to good, high paying jobs, there is also a practical element as well. Women make teams more productive.

Building The Next Generation

Social researchers have found evidence that that the main reason that women are less likely to go into STEM fields has more to do with cultural biases than it does with any innate ability. For example, boys are more encouraged to build things during play and so develop spatial skills early on, while girls can build the same skills with the same training.

Cultural bias also plays a role in the amount of encouragement young students get. STEM subjects can be challenging, and studies have found that boys often receive more support than girls because of educators’ belief in their innate talent. That’s probably why even girls who have high aptitude for math and science are less likely to choose a STEM major than boys of even lesser ability.

Yet cultural biases can evolve over time and there are a number of programs designed to change attitudes about women and innovation. For example Girls Who Code provides training and encouragement for young women and UNESCO’s TeachHer initiative is designed to provide better educational opportunities.

Perhaps most of all, initiatives like these can create role models and peer support. When young women see people like the Jennifer Doudna, Jocelyn Bell Burnell and the star physicist Lisa Randall achieve great things in STEM fields, they’ll be more likely to choose a similar path. With more women innovating, we’ll all be better off.

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