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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.
So Happy Together: Auto Portability & Authorized Portability
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins examines the positive interplay between auto portability and its nearly-automatic cousin – which he terms “authorized” portability. Authorized portability, writes Hawkins, occurs when a safe harbor IRA account not originating from within the auto portability network is matched to an active account in a plan that’s already adopted auto portability. While the accountholder must provide their consent to consolidate the balance, a frictionless automatic roll-in results, producing a win-win-win for participants, for plan sponsors and for adopting recordkeepers.
Don’t Relegate Lost & Missing Accounts to the Lost & Found—Consolidate Them in the Retirement System
RCH’s President & CEO Spencer Williams, writing in the Consolidation Corner Blog, opines on draft provisions in SECURE 2.0 legislation that call for establishment of a “lost & found” – including housing sub-$1,000 balances for all terminating 401(k) participants. As proposed, Williams observes that simply moving sub-$1,000 balances to the PBGC does little to reduce cashouts or stranded savings and offers auto portability as a “far more constructive method” to reduce cashouts and to promote consolidation of retirement savings.
A Happy Ending for Consenting 401(k) Participants
Writing in the Consolidation Corner blog, RCH’s Tom Hawkins examines the “happy endings” possible for 401(k) participants who give their consent for moving their balances forward to their current-employer’s plan. In the piece, Hawkins reveals new data collected from a large plan sponsor who’s implemented auto portability’s key technology components, but requires affirmative consent from participants in order to consolidate their balances. The data shows resounding success in obtaining participant consent, which augurs well for the future of auto portability and for consolidation of larger balances.
401(k) Retirement Savings: More ‘Gone’ Than ‘Forgotten’
Writing in RCH's Consolidation Corner, Tom Hawkins compares & contrasts the issue of ‘forgotten’ 401(k) accounts to its more problematic relative, 401(k) cashout leakage. In the piece, Hawkins takes the position that recent attention given forgotten accounts – via draft SECURE 2.0 legislation and the release of a drama-laden white paper – have created the mistaken impression that there’s a massive problem with forgotten 401(k) accounts, when in fact ‘forgotten’ 401(k) accounts are dwarfed by 401(k) cashout leakage, in terms of both their size and severity.
Re-Securing the Highest Purpose for a Retirement Savings Lost & Found
In his latest post in RCH’s Consolidation Corner blog, Tom Hawkins takes a deep dive into draft SECURE 2.0 provisions that dramatically expand the purpose, scope and scale of a Retirement Savings Lost & Found. The new provisions, contends Hawkins, would create a massive, government-run repository of micro-balance accounts costing taxpayers millions, while failing to boost retirement security. Hawkins encourages Congress to return to an earlier Lost & Found model, while addressing the broader, small-balance account problem through policies incentivizing the adoption of auto portability.
Leakage and Auto Portability Featured at Senate HELP Committee Hearing
Writing in RCH's Consolidation Corner, RCH EVP Tom Johnson reports on the U.S. Senate’s Committee on Health, Education, Labor and Pensions (HELP) 5/13/21 hearing on retirement security. With testimony from a blue-ribbon panel of witnesses, the hearing had a broad focus, but the topic of retirement savings leakage, and its most-promising solution, auto portability, were prominently featured in testimony by EBRI CEO Lori Lucas, and echoed by other witnesses and Committee members.
A Big Problem: Another Leakage Study Reaches the Same Conclusion
RCH’s Tom Hawkins examines a retirement savings leakage study from the Joint Committee on Taxation, a nonpartisan committee of the United States Congress. Released with little fanfare on 4/26/21, the study confirms the findings of earlier research on cashout leakage – namely, that cashout leakage is a big problem, is driven by job changing, and is exacerbated by "forced distributions and [a lack of] portability of plans.”
Auto Portability is an Easily Quantifiable Solution for Helping Participants Achieve Financial Wellness
In his latest article in RCH’s Consolidation Corner, CEO Spencer Williams addresses the conundrum facing employers, who are committed to promoting their employees’ financial wellness, but also face the grim reality of excessive retirement savings leakage, exacerbated by the COVID-19 pandemic. By adopting auto portability, Williams contends that plan sponsors can “easily quantify their financial wellness efforts” while getting out in front of cashout leakage.
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