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Mobile workforce (or job-changing participants) blog posts
ERISA’s Golden Anniversary has Set the Stage for Helping Future Generations Improve Their Retirement Outcomes—in 2025 & Beyond
Writing in the Consolidation Corner blog Retirement Clearinghouse (RCH) and Portability Services Network (PSN) President & CEO Spencer Williams looks to the past and has his eye on the future, as ERISA celebrates its 50th anniversary. Williams chronicles key participant-centric technologies that have emerged, including daily valuation, automatic enrollment and target date funds. Looking ahead, Williams points to the most impactful developments, including the formation of the Portability Services Network, which has embraced auto portability, “making it easy for participants to bring their retirement savings with them from job to job until retirement” and “optimiz[ing] what auto enrollment and target-date funds can do for American workers saving for retirement.”
The Risky Business of Cashing Out Plan Balances Below $1,000
Writing in the RCH Consolidation Corner blog, Tom Hawkins examines the “risky business” of automatically cashing out sub-$1,000 balances of separated participants. Hawkins writes that the practice, “may seem like an expedient approach to rid a plan of small balances” but “carries undesirable side effects for both the plan and for its participants” including uncashed distribution checks and unnecessary cashout leakage. The best approach, continues Hawkins, is to “adopt auto portability, which delivers all of the benefits but none of the flaws of old-school automatic rollovers.”
Taking Stock of the Saver’s Match: The Promise and The Challenges
Slated to begin operation with the 2027 tax year, the Saver’s Match program is coming more sharply into focus. While research is still ongoing, the picture being revealed is one of massive potential to increase retirement savings and to help close the minority wealth gap. These benefits may not come easily, given the sheer size of the population affected by the Saver’s Match, and the challenges that the program could face in getting up-to-speed. At the Annual iOme Challenge Forum, held on 6/20/24 by the Women’s Institute for a Secure Retirement (WISER), RCH & PSN President and CEO Spencer Williams, along with Morningstar’s Jack VanDerhei, took stock of both the promise and the challenges represented by the Saver’s Match program.
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."
As Time Passes, The Gains Become Harder
RCH's Tom Hawkins, writing in the Consolidation Corner blog, observes that our nearly 45 year-old defined contribution system may face diminishing returns as it tries to generate future growth, and should focus on quality and efficiency as it simultaneously expands access. Using fitness as an analogy, Hawkins offers a "workout plan" for the DC system, including plugging leakage through increased portability and emergency savings, while fostering increased retirement savings consolidation to avoid an explosion in small accounts. When combined with expanded access initiatives, these measures can dramatically increase Americans' retirement security, over and above expanding access alone.
Addressing the Achilles’ Heel of Auto IRA Programs
Writing in the RCH Consolidation Corner blog, Tom Hawkins offers his view that state-based Auto IRA programs, despite their potential size and strength, suffer from an obvious Achilles’ heel: a lack of retirement savings portability. Hawkins writes: "Without addressing their portability problem, Auto IRA programs could expand, but may never reach their full potential, housing large numbers of churning, small-balance accounts. However, with adequate support for portability both into and out of these programs, they could dramatically increase the odds that they deliver on their promise of building incremental retirement wealth for millions of Americans."
Key Portability Finding Located in EBRI’s Retirement Confidence Survey
RCH's Tom Hawkins digs into EBRI's 2022 Retirement Confidence Survey (RCS) and finds an interesting and valuable finding not referenced in the organization’s initial report, officially released to the public on Thursday, April 28th. In an excerpt of a report available to survey partners, the RCS has found that a plurality of job-changing 401(k) plan participants favor automatic plan-to-plan portability over consolidating their savings to an IRA, or to leaving their savings behind in their former employer’s plan. This result comes on the heels of EBRI’s 2021 survey, which found that nearly 9 in 10 participants believed that auto portability would be valuable to them, and Hawkins believes "others -- including the Department of Labor – will find 401(k) participants’ strong preference for plan-to-plan portability compelling."
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