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Auto Portability blog posts
Four Retirement Initiatives Vital to Closing the Racial Wealth Gap
Writing in the RCH Consolidation Corner blog, Tom Hawkins examines four retirement initiatives that could help in closing America's racial wealth gap. Leading off the article, Hawkins cites U.S. Treasury research identifying a significant racial wealth gap that has remained essentially unchanged over the past 20 years. In the retirement space, Hawkins identifies expanded access, auto portability, emergency savings and the Saver's Match as key initiatives that will make significant contributions to closing the gap, provided that retirement plan sponsors fully embrace and support them.
Auto Portability is Poised to Make an Even Bigger Impact in 2024
Writing in RCH's Consolidation Corner, RCH President & CEO Spencer Williams looks ahead to the New Year, when a key provision of the SECURE 2.0 Act—increasing the limit on small 401(k) accounts subject to automatic rollovers into safe-harbor IRAs from $5,000 to $7,000—goes into effect. While this development will cause more job-changing participants to be subject to automatic rollover provisions, the advent of auto portability could mean that these participants could ultimately fare much better, as auto portability's adoption accelerates. Williams references new results from RCH's Auto Portability Simulation (APS), which indicate that the new provisions -- when combined with auto portability -- could deliver even greater benefits in terms of reducing cashout leakage and preserving retirement savings, and offers plan sponsors with two New Year's resolutions to proactively respond to the changes.
Four Key Findings from the New Auto Portability Simulation
Writing in the RCH Consolidation Corner blog, RCH's Tom Hawkins summarizes the four key findings from the firm's Auto Portability Simulation, a discrete event simulation that models the impacts of auto portability over a 40-year period, and are detailed in a new white paper, Revisiting the Auto Portability Simulation: The Impact of the Portability Services Network, SECURE 2.0 and Expanded Access. Hawkins contends that the new APS analysis has improved the model’s predictive accuracy by incorporating new parameters that reflect “changing realities” driven by three major developments: 1) the advent of the Portability Services Network, 2) the passage of the SECURE 2.0 Act and 3) ongoing progress in expanding access to workplace retirement savings plans. The paper's four key findings highlight the growth of the participant population that will be subject to mandatory distributions, as well as auto portability’s effects on reducing cashout leakage, generating incremental retirement wealth, and delivering benefits to minorities and lower-income workers.
Auto Portability: It’s About the Participants
Writing in RCH's Consolidation Corner blog, Tom Hawkins reminds readers what auto portability is all about -- improving the retirement security of marginalized defined contribution participants. These participants -- comprised largely of minorities, women, younger and lower-income participants -- not only need auto portability the most, but there's solid evidence that they want it as well. To support his claim, Hawkins cites three highly-regarded surveys that have found a strong participant preference for auto portability and for consolidating small balances within the defined contribution system, and believes that recent developments will "augur well for Americans’ retirement security."
No One is Coming to Save You from Missing Participants
Writing in RCH's Consolidation Corner blog, Tom Hawkins provides his views on the dilemma facing plan sponsors who must confront the problem of locating missing plan participants. Despite ongoing efforts petitioning regulatory authorities for clear, bright line guidance, plan sponsors "must take decisive action to avoid being overwhelmed, including implementing effective, common-sense search practices, and pairing those search practices with other actions that will minimize the incidence of missing participants over time." Hawkins also urges plan sponsors to consider embracing retirement savings portability, including auto portability, to assist separated participants in consolidating their retirement savings following a job change.
A Perfect Storm is Brewing—But Automated Portability Could Defuse It
RCH and PSN President & CEO Spencer Williams, writing in the Consolidation Corner blog, notes that a rising incidence of hardship withdrawals and 401(k) loans – as reported by Bank of America – combined with a pending increase in the account-balance limit for automatic rollovers effective 12/31/23, could create a “perfect storm” for depleting Americans’ retirement savings. “Fortunately,” writes Williams, “sponsors and recordkeepers have access to a solution that can help them clean up their plans without automatically rolling terminated accounts into safe-harbor IRAs.” Auto portability, continues Williams, is a “capability [that] is more essential than ever, with 401(k) plan enrollment continuing to increase” and could serve to defuse the brewing storm of potential cash-outs.
Focus Shifts to Plan Sponsors as Portability Network Set to Go Live
Writing in the Consolidation Corner blog, RCH's Tom Hawkins describes the coming "shift" that will occur when the Portability Services Network (PSN) goes live at the beginning of the fourth quarter of 2023. Describing PSN's network-building achievements to date as "nothing short of phenomenal", Hawkins adds that "integration had proceeded apace" and that "plan sponsors will take center stage as they begin to adopt auto portability and witness its tangible results." Plan sponsor adoption will accelerate as auto portability demonstrates its obvious benefits to plans, to participants and to society at large, where adoption will eventually serve as a "positive indicator of a socially responsible enterprise."
The Future is Brighter for Small-Balance Retirement Accounts
RCH's Tom Hawkins, writing in the Consolidation Corner blog, describes the "brighter future" emerging for small-balance retirement savings accounts. Hawkins maintains that these accounts, which he associates with an increased incidence of sub-optimal participant outcomes, will fare much better in the future due to "large-scale, industry-led action on auto portability, and more recently, proactive steps being taken by leading providers to consolidate legacy small-balance IRAs."
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