By Tom Hawkins
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 that supports the case for auto portability.
The latest webinar showcased EBRI’s comparative analysis of auto enrollment-enabled defined contribution (DC) plans versus defined benefit plans and included a scenario that factored in the impact of auto portability on young Millennial males, ages 25-29. EBRI found that auto portability, when added to defined contribution plans with auto enrollment, substantially improved plan performance for this demographic, besting both the baseline and “stress test” scenarios.
In assessing the impact of auto portability on Millennial males, Jack VanDerhei, EBRI Research Director, noted that all DB equivalency ratios were substantially higher than 1.5%, remarking that auto portability produced figures “well outside of anything anybody sees, certainly in the private sector, that would have been required to have equivalency.”
The Growing Body of Research Supporting Auto Portability
The latest from EBRI adds to their growing body of independent research demonstrating that auto portability, by reducing cashout leakage, broadly increases retirement security and delivers significant benefits for America’s defined contribution system.
Previous EBRI analysis highlighting the public policy benefits of auto portability includes:
- Standalone benefits of auto portability (EBRI Issue Brief, no. 451- May 2018), estimated to be between $1.5 and $2.0 trillion.
- Benefits of auto portability, when combined with other retirement savings public policy initiatives, such as the Automatic Retirement Plan Act of 2017, or ARPA (EBRI Fast Facts – September 2018), where auto portability’s impact reduced the $4.13 trillion retirement savings shortfall by $645 billion, or 15.6%.
- Significant reductions in the retirement savings shortfall (RSS) for Generation X retirement savings shortfalls, by gender (EBRI Issue Brief, no. 471 – January 2019)
- EBRI Issue Brief no. 473, comparing the outcomes of all participants in 401(k) defined contribution plans with auto enrollment (AE) against defined benefit (DB) plans.