Employee Choice Arrangement nears — consolidate preserved accounts to save fees

The Employee Choice Arrangement (“semi-portability”) is coming, and fees are in the spotlight. MPFA data shows 307,000 preserved accounts as of this August — many workers who changed jobs hold several scattered MPF accounts. Consolidating them is easier to manage and can save on fees — and forces a fresh look at the default investment strategy MPF members often end up in.

What happens to your account when you change jobs?

After a job change, accrued benefits in the former employer’s contribution account move automatically into a preserved account with the same trustee. Unless the old and new employers are in the same group and scheme, the new job opens a fresh contribution account.

Why consolidate?

Multiple accounts across trustees are hard to manage and may incur layered fees. Transferring preserved-account benefits into a chosen scheme consolidates everything — and may land you a lower-fee plan.

What is a default fund?

If you make no investment choice, contributions go into the plan’s default arrangement — usually a conservative fund. The MPFA warns the default may not suit you; make an active choice.

What changes under the arrangement?

Employees may once a year transfer the employee-contribution portion of their contribution account to a scheme of their choice. The employer-contribution portion stays put. The competition it sparks among trustees benefits members.

What to check before consolidating?

Compare fund choices, fees and service across plans first. Also note guaranteed funds usually have lock-in conditions — transferring may forfeit the guarantee, so check with the trustee.

Compare plan fees at MPF fund comparison, and learn about preserved accounts at the MPF education hub.