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Auto Portability - Recent Developments
Find the most-recent auto portability media coverage and developments.
In his latest article in Employee Benefit News, RCH President & CEO Spencer Williams draws much-needed attention to the downside of traditional safe harbor IRAs. While plans can benefit by practices that remove small-balance accounts, Williams argues that this benefit may be illusory, as former plan participants will likely cash out or become “stuck” with multiple accounts that deplete their savings – both scenarios that could expose sponsors to potential liability. Auto portability, says Williams, can reverse this dysfunctional dynamic, achieving better outcomes for plans and participants alike.
In his five-part series in 401k Specialist, RCH's Tom Hawkins sheds light on the problem of cashout leakage, a silent crisis that unnecessarily robs millions of Americans of their retirement security. In his third article in the series, Hawkins examines the magnitude of the 401(k) cashout leakage problem, sharing new statistics recently supplied by EBRI, and offering some interesting comparisons so the reader can fully-grasp the enormity of the problem.
In his 8/22/19 article, Ingites' Emile Hallez reports on the Employee Benefits Research Institute (EBRI) 8/15/19 Issue Brief, which projects significant public policy benefits from the application of auto portability to the problem of cashout leakage. Auto portability, says Hallez, represents "a single policy change...[that]...could increase U.S. retirement savings by as much as $2 trillion over 40 years." Hallez then links the EBRI research to recent guidance issued by the DOL for the RCH Auto Portability program.
401k Specialist Editor-in-Chief John Sullivan reviews EBRI's latest Issue Brief, which highlights the problem of 401(k) cashout leakage, while projecting impressive, beneficial impacts of auto portability on addressing the leakage issue. As Sullivan article leads off, "the numbers are in, and solid" and include analysis of auto portability's benefits as a standalone initiative, as well as in tandem with other policy initiatives that expand plan access. Regarding policies that expand access, Sullivan quotes EBRI Research Director Jack VanDerhei, who states “our analysis further suggests that an auto portability initiative that reduces plan leakage can materially augment such efforts.”
P&I's Brian Croce reports on the new EBRI study examining the impacts of auto portability, finding that the plan feature "would significantly reduce plan leakage" -- estimated by EBRI at $92.4 billion per year. Croce recaps the impressive benefits projected for auto portability under EBRI's RSPM model, and notes the recent actions by the U.S. Department of Labor, who "gave Retirement Clearinghouse the green light to expand its auto-portability program, which is expected to reduce plan leakage and missing participants."
NAPA Net's Ted Godbout reports on a new EBRI study, released 8/15/19, that assesses the impact of auto portability on the nation's 401(k) system. Godbout highlights the benefits of auto portability to the entire system and to specific demographic groups, as well as the benefits of the feature when considered in tandem with other policy initiatives. Godbout concludes by noting that "these latest findings come on the heels of Retirement Clearinghouse receiving final approval from the Department of Labor granting relief from ERISA’s prohibited transaction restrictions to receive fees in relation to its auto-portability program, allowing the firm to move forward."
On 8/15/19, the Employee Benefit Research Institute (EBRI) published a comprehensive Issue Brief addressing the impact of auto portability on preserving retirement savings lost to 401(k) cashout leakage. Authored by Jack VanDerhei, EBRI's Director of Research and announced in an EBRI press release, the analysis utilizes EBRI's Retirement Savings Projection Model (RSPM) to quantify auto portability's impressive benefits 1) as a standalone policy initiative, 2) for specific demographic segments and 3) in tandem with other policy initiatives that expand access to workplace retirement savings plans. Critically, the Issue Brief also highlights the ongoing severity of the 401(k) cashout leakage problem, which their model estimates at $92.4 billion per year as of 2015, and "representing a serious problem that affects the potential of 401(k) plans to produce adequate income replacement in retirement."
Mercer's Law and Policy Group reports on the finalized prohibited transaction exemption (PTE) obtained by Retirement Clearinghouse from the U.S. Department of Labor (DOL) for the RCH Auto Portability program. The article also addresses the broader regulatory framework, including Advisory Opinion 2018-01A, which identified certain fiduciary responsibilities of plan sponsors and of RCH.