Retirement plan portability blog posts


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."


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.


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."


The 401(k) “House-Cleaning” to Come

The increase in the automatic rollover threshold from $5,000 to $7,000, as provided for in section 304 of the SECURE 2.0 legislation, will become effective for mandatory distributions made after December 31, 2023. What will be the impact of these provisions, if fully embraced by plan sponsors? One thing is certain – on both a one-time and ongoing basis, far more terminated participants will be subject to the automatic rollover provisions of their former-employers’ plans. Writing in the RCH Consolidation Corner blog, Tom Hawkins explores the impact of an increased threshold that, when paired with the advent of auto portability and the operational status of the Portability Services Network (PSN), could mean that small balance terminated participants will finally come out on top.


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.


Highway Through the 'Danger Zone'

Writing in the Consolidation Corner blog, RCH's Tom Hawkins notes that the issue of 401(k) cashout leakage is "once again in the news, with the publication of an alarming study by academics, as well as new data from Fidelity Investments." Hawkins goes on to cite "compelling real-world data that supports the efficacy of retirement savings portability in dramatically reducing unnecessary cashout leakage" -- representing "a much-needed highway through the ‘danger zone’ of unnecessary cashout leakage, increasing retirement security for millions of job-changing 401(k) participants."


A Renaissance for Auto Enrollment

Writing in the RCH Consolidation Corner blog, Tom Hawkins examines the past, present and potential future of automatic enrollment, the popular 401(k) plan feature that has made great strides since 2007, but has faced headwinds in achieving adoption in high-turnover enterprises. Now, thanks to a SECURE 2.0 mandate for new plans, along with the retirement industry's embrace of auto portability, auto enrollment may soon undergo a "renaissance" and enter its final phase of growth, delivering disproportionate benefits to under-saved and under-served workers, including minorities, women and those with lower incomes.