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Retirement plan portability blog posts
Kennedy Townsend: Solving Portability and Cashout Leakage are a Key DOL Priority
On 12/6/21, Kathleen Kennedy Townsend, Special Assistant to the Secretary of Labor for Retirement, served as the keynote speaker at EBRI's 90th Public Policy Forum, and outlined the big-picture, retirement-focused priorities of the DOL. One of the DOL's three priorities is the issue of portability and leakage. RCH's Tom Hawkins examines Townsend's remarks to her EBRI audience, which revealed that she has a clear grasp of the magnitude of the cashout leakage problem, as well as its most-promising solution – enabling plan-to-plan portability.
A Brief History of Auto Portability
Auto portability is a new “automatic” plan feature rapidly gaining acceptance by large defined contribution recordkeepers. While the feature is relatively new, it’s tempting to view auto portability as an “overnight success.” In fact, auto portability has been a long time in the making. In his latest Consolidation Corner article, as well as in an embedded video, RCH's Tom Hawkins examines a “brief history” of auto portability.
Assessing the State of DC Plans & Retirement Savings, 15 Years After the Pension Protection Act
Marking the 15th anniversary of the Pension Protection Act (PPA), RCH President & CEO Spencer Williams offers readers his views on the unintended consequences of that legislation that “continue to reverberate” for both plan participants and sponsors. Acknowledging that the automatic enrollment feature has been successful in promoting increased plan participation, Williams notes that the feature has also resulted in a “sharp uptick in small, stranded 401(k) savings accounts” that – absent easy plan-to-plan asset portability – has led to increased participant fees as well as higher levels of cash outs. In response, Williams observes that “the private and public sectors have worked together to create solutions” such as auto portability, which can help rectify the PPA’s flaws, and allow Americans to save more for retirement.
Four Reasons Why Auto Portability Can't Wait
Writing in RCH's Consolidation Corner blog, Tom Hawkins makes the case that auto portability can wait no longer and cites four key reasons that the new "automatic" feature should be adopted. Hawkins' key reasons include: 1) cashout leakage isn't waiting, 2) the "Great Resignation" is accelerating, 3) policy initiatives that expand access to workplace retirement plans require auto portability to realize their intended benefits, and 4) auto portability is here, now and working.
The Top Five Misconceptions About Auto Portability
Auto portability is a new “automatic” plan feature that is rapidly gaining acceptance by large defined contribution recordkeepers serving almost 10 million participants. While the feature is relatively new, it has received a great deal of attention in the media and has also been the beneficiary of definitive regulatory guidance, promulgated by the Department of Labor (DOL). Despite this, significant misconceptions persist about auto portability. The top five misconceptions are presented here, which includes a link to a short video.
EBRI Research Reveals Auto Portability’s Massive Incremental Benefits to Pending Legislation
In a 9/13/21 Employee Benefit Research Institute (EBRI) webinar (The Impact of Proposed Legislative Changes on Retirement Income Adequacy), EBRI Research Director Jack VanDerhei presented an analysis of pending legislative changes, including automatic contribution plans and arrangements (ACPAs), paired with a refundable saver’s credit. Unsurprisingly, the benefits for these policy initiatives were quite large. However, what was truly surprising was the sheer magnitude of incremental benefits delivered by the addition of auto portability, significantly paring retirement shortfalls for 35–39-year-olds, across all race and ethnicity categories.
Beware of Second Order Effects for Retirement Savings Public Policies
RCH's Tom Hawkins examines “second order effects” that can occur with retirement savings public policies currently that would dramatically expand access to, and participation in, defined contribution plans. While the benefits are impressive, additional undesired consequences can arise that are antithetical to the policies’ original intent, including increased cashout leakage, missing participants, uncashed checks and forgotten/stranded accounts. Understanding these highly predictable second order effects, Hawkins identifies plan-to-plan portability as a means of addressing them, while significantly boosting the overall policies’ benefits.
Senate Hearing Reveals Large Employer Support for Auto Portability
RCH’s newly-appointed EVP of Public Policy, Renée Wilder Guerin finds a lot to like in the 7/28/21 Senate Finance Committee hearing, where lawmakers heard testimony on how to increase retirement savings, including tackling the longstanding problems of cashout leakage, missing participants and “forgotten” retirement savings accounts. Wilder Guerin notes that auto portability was favorably mentioned twice by Aliya Robinson (SVP, Retirement & Compensation Policy for ERIC), as a policy initiative her organization – comprised of the nation’s largest plan sponsors – supports. Coming on the heels of EBRI’s 21st Annual Retirement Confidence Survey, where nearly 9 in 10 participants indicated their preference for the feature, Senate Finance Committee testimony “bodes extremely well for auto portability’s widespread adoption, as well as the enactment of public policies that further enhance it.”
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