In 1998, almost one-half (48 percent) of
all retirement distributions to job-changers (i.e., on job
termination) were rolled over: 40 percent were rolled over to an
individual retirement account (IRA) and 8 percent were rolled
over into another tax-qualified plan. This is an increase from
the 40 percent rollover rates in 1996 and 35 percent in 1993
The data used in this fact sheet are
from Hewitt Associates, a benefits consulting firm. The 1998
Hewitt database consisted of 33,317 distributions that went to
workers upon job termination (i.e., to job-changers), and these
distributions totaled $1.2 billion (for an average distribution
of $34,671). The number of observations available for 1996 and
1993 were larger, although the amounts distributed were smaller.
The 1996 Hewitt database contained 71,736 distributions totaling
$1.3 billion (for an average distribution of $18,313). The 1993
Hewitt database contained 117,781 distributions to job-changers,
totaling $1.6 billion (for an average distribution of $13,936).
The data show that rollover propensities
increase with the size of the distribution, i.e., the larger the
distribution, the more likely it will be preserved in a
tax-qualified vehicle. In 1998, 23 percent of distributions of
less than $3,500 were rolled over, compared with 92 percent of
distributions larger than $100,000. Analogous findings emerge
when the analysis focuses on the dollars distributed. Among
distributions of less than $3,500, 31 percent of the dollars were
rolled over, while among distributions of greater than $100,000,
92 percent of the dollars were preserved via rollover (chart 2).
The likelihood of rollover is also
positively correlated with the recipient's age. In 1998, 33
percent of all distributions made to workers in their 20s were
rolled over into IRAs or other tax-qualified saving vehicles.
This rollover rate increased steadily to 60 percent for
recipients in their 50s (chart 3).
Sixty-four percent of the dollars
distributed to recipients in their 20s were rolled over. This
figure increased to 89 percent for workers in their 50s.
The increased propensity to roll over
retirement plan distributions upon job change during the
1993-1998 period was driven by those receiving smaller
distributions (account balances of less than $10,000). The
fraction of those receiving a distribution of less than $3,500
who chose to roll it over rose from 17 percent to 23 percent
during that period. Among those with a distribution between
$3,500 and $5,000, 30 percent chose to roll it over in 1993,
compared with 40 percent in 1998. For distributions between
$5,000 and $10,000, 39 percent were rolled over in 1993, compared
with 42 percent in 1998. The same trend emerges when the fraction
of dollars distributed is examined over time.
For more information, contact Ken McDonnell, (202) 775-6342,
or see EBRI's Web site at www.ebri.org.
Source: EBRI Databook on Employee Benefits, fourth