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On Earth Day, Consider Auto Portability to ‘Recycle’ 401(k) Savings
On April 22nd, we celebrate the 55th annual Earth Day, and
that gives RCH’s Tom Hawkins the opportunity to consider how the concept of
recycling applies to our nation’s 401(k) system, which Hawkins characterizes as
having a “waste problem” that manifests in the form of excessive cashout
leakage and stranded accounts. By contrast, auto portability represents a
sustainable solution that ‘recycles’ small-balance accounts, and its adoption
is rapidly accelerating following the operational status of the Portability
Services Network (PSN).
Three Steps to Getting Off the Uncashed Distribution Check Treadmill
If you’re a defined contribution plan sponsor struggling with uncashed distribution checks, it can feel you’re on a never-ending treadmill. However, there are effective strategies that can greatly reduce the time, cost and risks associated with uncashed checks. Writing in the RCH Consolidation Corner blog, Tom Hawkins outlines three key steps to getting off the treadmill, including 1) a proactive program of locating missing participants, 2) eliminating the automatic cashout of sub-$1,000 balances and 2) utilizing safe harbor IRAs to resolve stale-dated checks.
Here’s to the Future “Graduates” of Auto Portability
While auto portability’s immediate impact in reducing cashouts is well-documented, new insights reveal another powerful long-term effect: systematic balance consolidation that helps small-balance job-changing participants cross the vital $10,000 savings hurdle, where retirement security becomes self-reinforcing. Writing the RCH’s Consolidation Corner blog, Tom Hawkins characterizes this effect as “graduating” from auto portability and uses Auto Portability Simulation (APS) data to follow a hypothetical “class” of 100 small-balance job-changers through their first three jobs – where 36% compile a perfect record of savings preservation and balance consolidation.
The Saver's Match and Auto Portability: A Powerful Combination
Two groundbreaking retirement savings initiatives could be poised to converge, potentially revolutionizing the way Americans save for retirement. The Saver's Match program, set to debut with the 2027 tax year, and auto portability, powered by the Portability Services Network (PSN), present a unique opportunity to address long-standing challenges in the retirement system. By leveraging the strengths of both programs, we can create a more robust and efficient retirement savings ecosystem that benefits millions of American workers.
The Accelerating Adoption of Auto Portability: A Market Adoption Theory Perspective
RCH’s Tom Hawkins, writing in the Consolidation Corner blog, examines the accelerating adoption of auto portability from the perspective of the tried-and-true theory of market adoption. Hawkins takes the position that auto portability is “on the cusp of becoming a mainstream feature in retirement plans” as it transits the innovator/early adopter phase and moves into the early majority phase, as described in the theory’s framework.
The Compelling Case for Women and Auto Portability
Auto portability will deliver broad-based benefits to America’s workforce, but research has shown that the new feature disproportionately benefits under-saved and underserved demographic segments, including minorities, women, lower-income and younger workers. Within those demographic segments, a very compelling case can be made for the importance of auto portability to women, who face unique retirement savings challenges that auto portability can help address.
PSN Auto Portability Signs Up 15,000 Plans in Year One
Retirement Clearinghouse (RCH) and Portability Services Network (PSN) Executive Vice President Neal Ringquist recaps breaking news of the day, where a press release issued by PSN announces that, in its first year of operation, more than 15,000 plans representing approximately 5 million participants have signed up for PSN auto portability. Ringquist's provides readers with a link to the full press release, links to more information about PSN auto portability, as well as to RCH's other portability services.
Dressing Up Traditional Automatic Rollovers
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins describes learning about the existence of so-called “world-class” automatic rollover IRA services which lay claim to unspecified, premium features. In his article, Hawkins characterizes them as “old-school, traditional automatic rollover IRAs” which place participants in high-fee, safe harbor IRA “landfills” where their small balances languish. What’s needed, writes Hawkins, is “not faux fancy features – it’s a low-fee, transitional safe harbor IRA that preserves small-balance retirement savings for only as long as they can be consolidated into a current-employer’s plan or into another IRA.”
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