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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.
Key Portability Finding Located in EBRI’s Retirement Confidence Survey
RCH's Tom Hawkins digs into EBRI's 2022 Retirement Confidence Survey (RCS) and finds an interesting and valuable finding not referenced in the organization’s initial report, officially released to the public on Thursday, April 28th. In an excerpt of a report available to survey partners, the RCS has found that a plurality of job-changing 401(k) plan participants favor automatic plan-to-plan portability over consolidating their savings to an IRA, or to leaving their savings behind in their former employer’s plan. This result comes on the heels of EBRI’s 2021 survey, which found that nearly 9 in 10 participants believed that auto portability would be valuable to them, and Hawkins believes "others -- including the Department of Labor – will find 401(k) participants’ strong preference for plan-to-plan portability compelling."
On Filling the Leaky 401(k) Bucket
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins opines on pending legislation that seeks to expand access for under-served and under-saved demographic segments, but may fall short if it fails to incorporate measures that minimize cashout leakage. Noting that SECURE 2.0’s expanded access provisions seek to benefit women, minorities and lower-income workers – the same demographic segments that cash out their small balance savings at disproportionate rates – Hawkins suggests that legislators consider inclusion of measures that would “spur more rapid adoption” of auto portability “by codifying into law the guidance issued by the Department of Labor and by creating modest tax incentives to encourage more early adoption of the feature.”
The Next Area to Tackle for Preserving Retirement Savings: Uncashed Distribution Checks
Writing in the RCH Consolidation Corner blog, RCH President & CEO Spencer Williams examines the ongoing problem of uncashed distribution checks. Worker mobility, as well as the prevalence of automatic cashouts for balances under $1,000, conspire to create an administrative burden as well as a significant fiduciary risk for plan sponsors. Auto portability, writes Williams, can “mitigate this exposure, and help participants increase retirement savings, by significantly reducing the need for automatic cash-outs” while simultaneously minimizing cashouts, a situation that Williams describes as “a win-win.”
Auto Portability’s Key Role Featured in U.S. Senate HELP Committee Hearing
Renée Wilder Guerin, RCH’s EVP of Public Policy, examines the 3/29/22 hearing held by the U.S. Senate Committee on Health, Education, Labor & Pensions (HELP), which focused on solutions that would enhance retirement security for Americans, particularly those who are under-served and under-saved. Two of the four witnesses, WISER’s Cindy Hounsell and The Aspen Institute’s Ida Rademacher offered testimony highlighting the benefits of auto portability in leveling the playing field for women, minorities, and lower income workers. The latest hearing, writes Wilder Guerin “builds on previous Senate hearings and fuels growing momentum for auto portability among legislators, policymakers, advocacy groups, providers and plan sponsors.”
What Financial Advisors Need to Know About Auto Portability
In his latest article in the Consolidation Corner blog, RCH EVP and Chief Revenue Officer Neal Ringquist speaks directly to financial advisors on auto portability. Ringquist firmly believes that financial advisors will enjoy significant benefits from auto portability, but understands that all advisors may not “be there” yet in terms of fully understanding what auto portability is, how they stand to benefit from it, and how they should assess auto portability’s prospects for success. Ringquist walks advisors through important facts, data and information that should facilitate better understanding of auto portability and how it could positively impact their practices.
Consolidation is Vital to Reducing 401(k) Cybersecurity Risk
Retirement Clearinghouse EVP & Chief Operating Officer Ricki Ingalls takes to RCH’s Consolidation Corner blog to make the case for 401(k) account consolidation as a means to reduce cybersecurity risks for the 401(k) system. Appealing to common sense, Ingalls notes that “fraud starts small” and that consolidation of small balance 401(k) accounts achieved via auto portability can effectively minimize the cyber “attack surface” these excess accounts represent. Ingalls continues by describing the robust cybersecurity features that have been incorporated into auto portability.
Towards a Sustainable and “Greener” 401(k) System
RCH’s Tom Hawkins, writing in RCH’s Consolidation Corner blog, reacts to the DOL’s 2/14/22 Request for Information (RFI) seeking comment on ways to “protect life savings and pensions from threats of climate-related financial risk.” In his piece, Hawkins contends that our retirement system itself has significant sustainability problems that are more financially material to future retirees than climate change. Hawkins urges action to address the 401(k) system’s inefficiency and waste, which could “produce more of the ‘green’ that will matter to future retirees.” Hawkins notes the findings of a recent Brookings Institution report on the problem of small retirement accounts, which recommends improvements in “combining accounts” and includes support for auto portability.
Auto Portability Featured in ERISA Advisory Council Report
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins reports on the release of the ERISA Advisory Council’s latest report – “Gaps in Retirement Savings Based on Race, Ethnicity and Gender.” In that report, auto portability was specifically referenced multiple times in testimony by Cindy Hounsell, President of WISER, and the final report included a recommendation to “study the feasibility of a national portability system” – more commonly and accurately known as auto portability. Hawkins found the EAC’s recommendation “remarkable given the fact that it emanated from a diverse group of 14 industry experts holding a wide range of opinions on practically any topic.”
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