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Auto Portability - Public Policy
Learn more about retirement savings public policy positions related to Auto Portability.
NAPA Net reporter Ted Godbout covers the release of EBRI Issue Brief #550, which examined the effects of potential public policy initiatives, including an Automatic Contribution/Plan Arrangement (ACPA), an enhanced saver's credit, a "skinny" 401(k), and a student loan debt employer match. Importantly, the EBRI study also noted the "stacking" effect of auto portability onto the ACPA and Saver's Credit combo, where it reduced retirement deficits by an additional 11% to 14%, depending on race.
EBRI Issue Brief #550, released 1/20/22, examines the effects of various public policy initiatives, including an Automatic Contribution/Plan Arrangement (ACPA), an enhanced saver's credit, a "skinny" 401(k), and a student loan debt employer match. Importantly, the EBRI study noted the massive, incremental effects of auto portability, when added to the ACPA and Saver's Credit, where it reduced overall retirement deficits by 11% to 14%, depending on race.
401k Specialist Editor-in-Chief John Sullivan examines the latest Issue Brief from the Employee Benefit Research Institute (EBRI), which assesses the impact of recently-proposed changes to the retirement system and how they could shrink retirement deficits. Sullivan notes that "combining automatic contribution provisions with an enhanced Saver’s Credit in 401ks and DC plans would reduce retirement savings shortfalls by 17% to 26%, depending on race" adding that "the addition of auto portability of retirement accounts resulted in a further double-digit reduction in savings shortfall across all races examined."
Robert L. Johnson, Founder and Chairman of The RLJ Companies and majority owner of Retirement Clearinghouse (RCH), has secured endorsements for auto portability from two premier civil rights organizations – the National Urban League, and the National Association for the Advancement of Colored People (NAACP) – both with over a century of experience advocating for solutions that address the inequities and economic challenges experienced by Black Americans and by other communities of color. Writing in 401k Specialist, RCH's Renée Wilder Guerin, Executive Vice President, Public Policy, summarizes these major developments.
Alicia Munnell, director of the Center for Retirement Research at Boston College and writing in MarketWatch, examines the phenomenon of 401(k) leakage, and considers the balancing act between preserving savings for retirement, vs. allowing access to savings for participants who need their money. Munnell identifies the "really annoying and large source of leakage is people cashing out when they change jobs" and, in an ideal world, would prefer to "prohibit cashing out at job changes entirely." More practically, Munnell suggests that RCH's auto portability program, "a platform for automatically transferring balances under $5,000 from an old plan to a new plan" could coexist with "a system with standardized forms and procedures for balances of all sizes."
Writing in 401k Specialist, RCH's Tom Hawkins offers an optimistic assessment of the prospects for auto portability. Hawkins, a self-confessed "long-time, unabashed proponent" of auto portability, has recently concluded that the feature's eventual, widespread adoption is "inevitable" and supports his position with four key points.
In a publication released 1/6/2022 as part of the Aspen Institute's Financial Security Program, the 2021 Aspen Leadership Forum on Retirement Savings Report is a summary of the April 2021 Aspen Leadership Forum on Retirement Savings. The Forum's report devotes a page to "Six Stats That Tell the Portability Story" which notes the propensity of American workers to change jobs and to cash out. It also mentions two compelling statistics: 1) that 85% of participants like the idea of automatic portability and 2) that 57% of retirement experts supported a government mandate for auto portability, while almost half (48%) believed that automatic portability was feasible without such a mandate.
Writing in Employee Benefit News, RCH President & CEO Spencer Williams marks the 15th anniversary of the Pension Protection Act (PPA) and offers his views on the unintended consequences of that legislation. Acknowledging that the automatic enrollment feature has been successful in increasing plan participation, Williams notes that the feature also resulted in a “sharp uptick in small, stranded 401(k) savings accounts” that – absent easy plan-to-plan asset portability – has led to increased participant fees as well as higher levels of cash outs. In response, Williams observes that “the private and public sectors have worked together to create solutions” such as auto portability, which can help rectify the PPA’s flaws, and allow Americans to save more for retirement.