Auto Portability Adoption Picks Up Steam

By Neal Ringquist | July 17, 2024

New retirement innovations, however compelling they may be, face their biggest challenge in surmounting the glacial pace of change that prevails in the retirement industry, where nothing comes easy.

That’s why I’m very pleased to report that plan sponsor adoption of auto portability via Portability Services Network (PSN) recordkeepers has begun to pick up steam, with some impressive early-stage results.

As of mid-July 2024, of the three PSN-affiliated recordkeepers now officially “live” with auto portability, over 3,300 plans – representing almost 1.4 million active participants – have adopted PSN auto portability through their recordkeepers.

What makes these results particularly impressive is the fact that they represent a partial year’s effort from the three “live” recordkeepers and with the understanding that the timeframe for plan sponsor adoption is expected to occur over a five-year period, once each recordkeeper completes integration.

Overcoming the Glacial Pace of Change
To put these recent results into perspective, it’s taken over a decade to establish a support network of legislators, regulators, trade organizations, service providers and advocacy groups – all of whom have played vital roles in bringing auto portability to fruition. Without this support network, auto portability could never have overcome regulatory and legislative hurdles, a prerequisite to attracting industry support.

However, to give credit where it’s rightfully due, PSN has truly “melted the ice” and made auto portability’s ascendance practical. Presently comprised of six owner-member recordkeepers representing approximately 82 million workers (63% of the market) across more than 185,000 employer-sponsored retirement plans, these providers are committed to integrating auto portability and to actively promoting the feature to their plan sponsor clients.

Their efforts are beginning to pay off.

A Plan Sponsor’s View on Adopting Auto Portability
In the early stages of adoption for any new technology, innovators come to the fore. An innovative spirit not only typifies members of PSN, but it also applies to auto portability’s early adopting plan sponsors.

Here is an excellent example recently in the media. A 7/1/24 PLANSPONSOR article reflects upon the pending retirement of Carl Gagnon, assistant vice president of global financial well-being and retirement programs at Unum Group and “known for innovative plan design ideas and offering a wide swath of benefits to his employees." The article notes that Unum has elected to adopt auto portability, and quotes Gagnon as stating: "We think that’s going to be extremely attractive to our new hires. We’re trying to make it easier for our employees to consolidate their assets into one plan and into one company so they can manage it all.”

Looking Ahead
As the balance of PSN recordkeepers are scheduled to go live in 2024 and in early 2025, and as their plan sponsor clients adopt auto portability, the foundation will be laid for the first significant volume of PSN network transactions later this year. In addition, other recordkeepers have expressed interest in implementing PSN auto portability in 2025.

Looking further ahead, I believe that auto portability will become a “must-have” feature for sponsors and recordkeepers, creating a self-reinforcing, accelerating cycle of adoption and resulting in millions of consolidated small-balance accounts annually.

In short, expect more adoption ahead – a lot more.