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Consolidation Corner Blog
Consolidation Corner is the Retirement Clearinghouse (RCH) blog, and features the latest articles and bylines from our executives, addressing important retirement savings portability topics.
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.”
Leakage & Shrinkage: Two Brothers from the Same Mother
Writing in the RCH Consolidation Corner blog, Tom Hawkins compares and contrasts cashout leakage with “shrinkage” – a related phenomenon newly identified by Vanguard in their September 2024 study: Job transitions slow retirement savings. Although the Vanguard study does not specifically use the term “shrinkage” – their study refers to a decline in retirement savings rates that occurs when individuals transition between jobs, leading to sub-optimal retirement outcomes. Hawkins also finds it intriguing that the Vanguard study identifies auto portability as a potential solution for the shrinkage problem, promoting better retirement outcomes for workers.
Measuring the Value of Intensive Missing Participant Searches
Inevitably, situations arise when plan sponsors must perform more intensive missing participant searches, where additional search resources are applied to improve the quality of the search, over and above what an e-Search can deliver. More-intensive missing participant searches can increase the quality of search results, but by how much? As it turns out, quite a bit. RCH’s Tom Hawkins examines almost 7,000 intensive searches and identifies significant improvements in search quality that can result.
Four Compelling Reasons for Plan Sponsors to Adopt Auto Portability
Writing in the Consolidation Corner blog, RCH's Tom Hawkins offers plan sponsors four compelling reasons to adopt auto portability. Hawkins cites the groundswell of support that auto portability has already received from the retirement industry, from legislators and regulators, as well as the thousands of plan sponsors who have already adopted, advising plan sponsors that they need not fear "being first" when they adopt. By adopting, they'll be acting in their plan's best interests and in the interests of its participants, who've expressed a strong desire for the new feature.
Two Saver’s Match Resources Now Available
Retirement Clearinghouse (RCH) has launched two new Saver’s Match resources, which offer plan sponsors, plan providers and participants with consolidated information about the Saver’s Match program, as well as a new saver-focused tool – the Saver’s Match Estimator – which will calculate an estimated matching contribution under the program. RCH encourages everyone to use the new tools, and to share them within their network.
Auto Portability Adoption Picks Up Steam
RCH EVP Neal Ringquist examines recent developments surrounding auto portability, which is now in the early stages of plan sponsor adoption. Ringquist writes that plan sponsor adoption “has begun to pick up steam” and shares results that “over 3,300 plans – representing almost 1.4 million active participants” have adopted auto portability via their PSN-affiliated recordkeepers. Ringquist credits PSN recordkeepers with leading the way, while citing a recent article about the Unum Group that provided an innovative plan sponsor’s perspective on the new feature. Looking ahead, Ringquist envisions auto portability becoming a “must-have” feature for sponsors and recordkeepers and expects “more adoption ahead – a lot more.”
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.
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