TRANSCRIPT:

Tom Hawkins: Welcome to another edition of the RCH Consolidation Corner Channel, where we provide you with audio content that explores key issues in the preservation and consolidation of retirement savings. Today, we’ll be commemorating the 55th annual Earth Day, and looking at how the concept of recycling applies to 401(k) auto portability. We hope you’ll find the audio enjoyable and informative.

NARRATOR: As we commemorate the 55th Earth Day, it's worth examining how the concept of recycling applies not just to environmental conservation but also to our retirement system.

The U.S. retirement landscape faces a significant waste problem: the inefficient management of 401(k) accounts during job transitions.

America's highly mobile workforce changes jobs frequently, with the average person holding about 10 positions throughout their career. This mobility creates a serious issue - approximately $92 billion leaks from our retirement system each year, primarily due to job changes.

Small-balance accounts face more difficult challenges. When employees leave jobs, employers can automatically transfer balances up to $7,000 into safe harbor IRAs. Unfortunately, these accounts experience high cash-out rates - about 55% within a year - compared to 31% for all 401(k) accounts. Safe harbor IRAs typically offer low yields while charging fees that gradually deplete balances, especially harmful for smaller accounts.

Auto portability presents a sustainable solution to this problem. This innovative approach automatically transfers small balances from previous employer plans to active accounts in new employer plans when workers change jobs.

Developed by Retirement Clearinghouse, this system operates within existing retirement plan infrastructure, making it easier for employees to maintain their savings across job transitions. A major advancement came in late 2023 with the launch of the Portability Services Network, or PSN - a consortium of major recordkeepers that facilitates the widespread adoption of auto portability.

In its first year, PSN has seen over 15,000 plans covering 5 million participants adopt the service, and at the end of the first quarter of 2025, plans adopted have climbed to over 18,400. When fully adopted, estimates suggest auto portability could reduce cash-out leakage by $355 billion over 40 years and preserve an additional $1.6 trillion in retirement savings, including $216 billion for 30 million Black Americans.

Auto portability delivers several key benefits: it reduces lost or forgotten retirement accounts, prevents premature cash-outs, simplifies account management for workers with multiple jobs, and particularly helps minorities, women, and lower-income workers who typically have smaller-balance accounts. Just as recycling programs help preserve natural resources, auto portability helps preserve financial resources for retirement. By facilitating 401(k) account consolidation, more Americans can build sustainable retirement security rather than watching their savings diminish in low-yield, fee-heavy safe harbor IRAs.

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