By Thomas Hawkins | November 29, 2023

It’s sometimes easy to forget a basic tenet about auto portability.

Auto portability is about the participants.

And not just any participants. Auto portability is about the participants who truly need it, and – according to multiple surveys – have expressed a strong preference for it.

A Fast and Furious Sequence of Events
Given the pace of recent and highly remarkable events associated with auto portability, it’s easy to get a bit ungrounded.

These events include:

One could be forgiven for focusing on these events, because quite frankly, there is simply no precedent for this type of collaborative action in the retirement services industry.

It’s For the Participants
However, the fact remains that these actions are driven by the industry’s sincere desire to improve the retirement security of marginalized defined contribution participants. Specifically, auto portability addresses the needs of small-balance retirement savers (below $7,000) who frequently change jobs and become subject to their former-employer’s mandatory distribution provisions.

Most often, these small-balance job-changers:

  • Are minorities and/or women
  • Have lower incomes
  • Are younger
  • Cash out much more frequently than their higher-balance counterparts

A simple graphic illustrates the effects of preserving 1-3 $7,000 balances on future retirement income:

Figure 1: Effect of Preserving Small Balances on Future Retirement Income Under Multiple Job-Changing Scenarios

Participants Want Auto Portability
While there’s unanimity on the participants who will benefit the most from auto portability, you might be surprised to learn that participants want auto portability as well.

There are at least three highly credible surveys that reveal participants’ strong preferences for auto portability:

Paying Attention to Participants
Ultimately, auto portability is about paying attention to the needs and desires of the most marginalized defined contribution participants. If the entire defined contribution ecosystem can come together and take collaborative action on their behalf, it augurs well for Americans’ retirement security.