By Thomas Hawkins | February 10, 2022

I’m old enough to remember a time when auto portability was a concept, scarcely worthy of serious attention by practically anyone except a few zealots with an idea.

These days, hardly a week goes by where there’s not another important indication of auto portability’s ascendance as a vital, necessary, and highly credible retirement savings public policy.

Such was the case this week, with release of the latest report from the Department of Labor’s ERISA Advisory Council (EAC), entitled “Gaps in Retirement Savings Based on Race, Ethnicity and Gender” – where the feature was specifically referenced 6 times in testimony by Cindy Hounsell, President of the Women’s Institute for a Secure Retirement (WISER), and the final report included a recommendation to “study the feasibility of a national portability system” – more commonly and accurately known as auto portability.

While recommending a government-led feasibility study is not exactly a stunning and bold call to action, it’s still an important development, and represents a de facto acknowledgement that auto portability will materially reduce the retirement savings wealth gap.

Testimony by Cindy Hounsell, WISER
Cindy Hounsell, the most passionate, persistent and highly respected voice for women’s retirement security, was one of almost 30 witnesses whose testimony the EAC considered to be “in scope” with the report’s objectives and was excerpted and featured in the final report here.

While Hounsell’s testimony addressed a range of important women’s issues, she dedicated a section of her remarks to the topic of auto portability, which she broadly characterized as a “positive step.” To support this contention, Hounsell offered findings from the Employee Benefit Research Institute (EBRI), pegging the 40-year, estimated system-wide benefits of auto portability at $1.5 to $2.0 trillion. Hounsell further observed that those benefits would primarily accrue to those with lower incomes, to minorities and to women – in other words, the “financially challenged demographic groups” whose significant retirement wealth gaps require closure.

The EAC’s Recommendation to Study “National Portability”
Clearly, the EAC must have been listening to Hounsell’s testimony, as well as paying attention to ongoing developments in the saga of auto portability, including the recent endorsements from the NAACP and the National Urban League.

Specifically, the EAC included a carefully worded recommendation to “study the feasibility of a national portability system to encourage and facilitate account consolidation and retirement savings preservation for individuals with small account balances in several plans.”

If that’s not auto portability, then I’m not sure what is.

My Take
Viewed positively, as I do, the EAC’s recommendation is remarkable given the fact that it emanated from a diverse group of 14 industry experts holding a wide range of opinions on practically any topic. It’s also a tacit acknowledgement that auto portability can help preserve small-balance retirement savings, and in so doing, significantly close the retirement savings wealth gap for minorities, women and lower-income workers.

Were I to offer my gentle criticism of the report’s recommendation, it would be the following:

  • The case for auto portability is way beyond the need for a government-led feasibility study. There is already a private sector-led solution that has been under development for over a decade, has already received enabling regulation from the Department of Labor, and has recently been thoroughly scrutinized and subsequently adopted by 2 large recordkeepers (with more on the way) who collectively serve over 10 million participants.
  • As auto portability is increasingly adopted, it will help to address fragmentation – not within the federal government’s regulatory agencies – but within the defined contribution system itself.

In short, auto portability is exactly the response from the private sector that you would hope for and expect, and I believe that the EAC’s recommendation is strong evidence that the broader retirement industry has finally come around to this point of view.

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