Auto Portability - Public Policy
Learn more about retirement savings public policy positions related to Auto Portability.
In his capacity as Head of US Defined Contribution and Financial Wellness Research, Mercer's Neil Lloyd notes the recent emergence of serious industry dialogue on plan-to-plan retirement savings portability. Long a proponent of portability, Lloyd recognizes the inherent problems associated with holding multiple retirement saving accounts. In his piece, Lloyd strongly advocates for auto portability, stating that it "might be the solution to less efficient small-balance accounts." Lloyd goes further, opining that auto portability should be considered a legislative priority, writing that "SECURE ACT 2 will be vastly improved if provisions further supporting auto-portability are included."
401kTV's Steff Chalk examines the issue of 401(k) cybersecurity, specifically focusing on the benefits of auto portability in the management of cybersecurity risk. Referencing RCH President & CEO Spencer Williams' recent article in Employee Benefit News, Chalk states that "the technology that makes 401k auto-portability possible may also enhance existing industry best practices that protect plan participants’ personal data." Chalk also adds that "plan sponsors [should] embrace 401k auto-portability to lessen the instances of small-balance accounts and missing participants."
On April 16th, as part of their Strategic Issues Webinar Series, the LIMRA Secure Retirement Institute delivered the webinar Regulatory and Legislative Trends Impacting the U.S. Retirement System, featuring presenter Michael Kreps, Principal, Groom Law Group, and a highly-influential voice in DC on retirement public policy. Kreps provided an insider's update on auto portability, which he characterized as having the potential to deliver “an enormous boost to the industry and to participants in general.”
In his 4/29/19 article, P&I's Brian Croce addresses the deliberate pace of guidance offered by the Department of Labor (DOL) over the last two years. The article notes that the DOL's advisory opinion "issued for Retirement Clearinghouse LLC over expansion of its auto portability program to reduce plan leakage" was one of two issued thus far, and the only advisory opinion issued in 2018. The article also highlights the ongoing emphasis of the DOL on enforcement & recovery activities with regard to missing participants, a topic of concern for plan sponsors.
On Earth Day 2019, as we focus on creating a sustainable and eco-friendly environment, it's worth considering how the application of similar principles would benefit our retirement system. America’s 401(k) system is unsustainable – urgently requiring an upgrade to effectively deliver on its intended goal – helping millions of Americans enjoy a timely and comfortable retirement. The good news is that we're beginning to see important signs of action that could ultimately address the problem.
Jack VanDerhei, EBRI Research Director, envisions a critical role for auto portability in solving America's retirement crisis. In a recent symposium conducted by TheStreet in New York, VanDerhei identified four key retirement challenges -- plan coverage, long-term care costs, longevity and leakage. VanDerhei predicted that leakage will be addressed when auto portability "become[s] a part of the retirement landscape" and "little account balances, which are really highly-susceptible to being cashed out" are automatically consolidated into larger 401(k) balances.
In their March 20th webinar "Achieving Retirement Income Equivalency Between Final-Average-Pay Defined Benefit Plans and Automatic Enrollment 401(k) Plans in the Private Sector", the Employee Benefits Research Institute (EBRI) revealed more research supporting the case for auto portability, with their finding that auto portability could dramatically improve defined contribution plan performance for young Millennials.