Press Release

Bob Johnson's Interest in 401(k)s

RolloverSystems Bets on BET Founder to Help Consumers Reallocate Their Investments

By Philana A. Patterson, Black Enterprise

When Reginald Bowser first launched his company RolloverSystems Inc, a 401(k) rollover company, in March 2003, he probably never envisioned becoming partners with one of the country's top business leaders. But, with an investment from Black Entertainment Television founder Robert L. Johnson, that's just what happened, and now the company is poised to go to the next level.

Johnson's business acumen has launched several successful ventures, including the founding of BET, which he sold to Viacom Inc. for $3 billion in 2000; majority ownership of the NBA's Charlotte Bobcats and the WNBA's Charlotte Sting. He also sits on the board of several Global 100 companies. It's that same business savvy that led to Johnson making an investment in RolloverSystems Inc. , a Charlotte, North Carolina-based company that helps exiting employees easily reallocate their 401(k) or 403(b) investments into tax-deferred IRA accounts.

In addition to his investment, Johnson will become chairman of RolloverSystems' board of directors. While the amount of Johnson's investment was undisclosed, Bowser calls it "substantial."

"We're at an inflection point in our business where we have a variety of companies clamoring to use our service," Bowser says. "We need to increase our staff on the sales and operations side to keep up with demand."

The traditional rollover process can take up to eight weeks and often includes confusing paperwork, which, in the past, has led some consumers to allow their former companies' 401(k) plans to send them a check. RolloverSystems' service, RolloverMarket, streamlines the process and has helped users avoid the federal penalty and income tax hit that comes when a 401(k) is cashed out before age 59 ½. About 78% of people with balances under $5,000 cash out and endure the tax penalties, Bowser says.

RolloverSystems' services may likely be in greater demand now because of a new law, which took effect March 28, prohibiting employers from cashing out former employees' accounts with balances between $1,000 and $5,000. Typically, many company 401(k) plans don't want to hold onto smaller balances because the cost of servicing these accounts often outweighs the benefits of having the money sit there. Last year, more than 10 million Americans had the opportunity to roll 401(k) accounts with balances in that range.

Johnson's clout in the business world and access to decision makers is definitely a part of the strategy to grow RolloverSystems and has already resulted in leads on new business.

"What made RolloverSystems attractive is that it's a technology play tied to a government mandate," Johnson says. He also likes that the business isn't capital intensive, doesn't require a large workforce, and is headed up by "a very passionate entrepreneur."

RolloverSystems' current clients include asset managers such as FMR Corp.'s Fidelity Investments, Charles Schwab & Co., and T.D. Waterhouse Investment Services Inc. It currently has 30 employees, but could add up to 20 more workers by the end of the year.

Bowser declined to provide the company's financial results but did say that in 2004 revenues doubled from its level in 2003.