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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.
Last year at this time, Retirement Clearinghouse (RCH) predicted that 2022 would be a pivotal year for retirement savings portability. It turns out we were right, but we confess to being pleasantly surprised at just how consequential (and positive) the year has been, and it’s not over yet. Writing in the Consolidation Corner blog, RCH's Tom Hawkins provides a rundown of key events during 2022 that have helped to positively shape the future of retirement savings portability.
For defined contribution recordkeepers, competition has long been fierce, so it’s extraordinary when industry rivals join forces and align around a common cause. That alignment around auto portability, embodied in the newly launched Portability Services Network (PSN), was on full display in a 12/8/22 Groom Law Group webinar. The event featured representatives from retirement industry titans and founding PSN members Alight Solutions, Fidelity Investments and the Vanguard Group, joined by Retirement Clearinghouse (RCH).
A New Year’s Resolution for Sponsors: Facilitate Automated Plan-to-Plan Portability for Your Participants
Writing in RCH's Consolidation Corner blog, and taking his cue from the 10/5/22 announcement of the industry-led utility (Portability Services Network) to accelerate the nationwide adoption of auto portability, RCH President & CEO Spencer Williams encourages plan sponsors resolve to adopt auto portability in the New Year, for both their participants and for the health of their plans. Williams writes: "[a]s we look ahead to the New Year, plan sponsors can resolve to help their participants increase their retirement savings—and increase key metrics such as average account balance—by adopting auto portability."
CHARLOTTE, October 5, 2022—Fidelity Investments®, Vanguard, and Alight Solutions announce that they have collaborated with Retirement Clearinghouse, LLC (RCH) to create a consortium of workplace retirement plan recordkeepers, Portability Services Network, LLC, to accelerate the nationwide adoption of auto portability to help America’s under-served and under-saved workers improve their retirement outcomes.
When it comes to 401(k) diversity, equity, and inclusion (DEI) initiatives, RCH’s Tom Hawkins observes broad support for expanded access and automatic features, since they “are supportive of increasing participation and asset accumulation across all demographics.” No one, writes Hawkins, points to ‘traditional’ automatic rollovers as facilitating DEI goals, as they “penalize the very demographic segments that DEI initiatives strive to uplift.” Hawkins urges plan sponsors to re-tool ‘traditional’ automatic rollover programs to include education and assistance and to incorporate auto portability – delivering more equitable retirement outcomes for under-saved and under-served participants.
401(k) plan consultants have been forceful advocates for the adoption of best practices at leading retirement plan sponsors. However, when it comes to automatic rollover programs, plan consultants sometimes miss the mark, at least in terms of participant outcomes. RCH's Tom Hawkins, writing in the Consolidation Corner blog, makes the case that 401(k) plan consultants should extend their analysis to emphasize those automatic rollover program components that help participants improve their retirement outcomes by avoiding cashouts, moving their retirement savings forward, and keeping their stay in safe harbor IRAs as brief as possible.
In observance of National 401(k) Day on Friday, September 9th, RCH's Tom Hawkins takes the opportunity to reflect on the long-running, highly successful public-private collaboration that has fostered the rapid ascendance of America’s 401(k) system. Hawkins writes that "this partnership will continue to drive innovations that will expand and improve the 401(k) system for millions of Americans – not only helping them to save more but preserving more of their savings for retirement."
Every Dollar Saved for Retirement Matters -- So Save More By Avoiding Cash-Outs & Consolidating 401(k) Accounts
RCH Founder, President & CEO Spencer Williams examines the implications of a study from Boston College's Center for Retirement Research, finding that the youngest Baby Boomers, with less access to defined benefit (DB) plans than their predecessors, are drawing down their 401(k)-based retirement savings at much faster rates, with many poised to run out of retirement savings by age 85. These findings underscore the need to preserve more 401(k) savings for younger generations, and according to Williams, the best way to do that is "to consolidate 401(k) savings accounts.....and to avoid making any premature cash-outs." Sponsors, states Williams, "can....help participants save more for retirement, so they don’t outlive their savings, by adopting auto portability.