Foundational Research

Fidelity Releases Q3 2024 Retirement Analysis

Fidelity Investments has released their latest quarterly retirement analysis, with the firm providing insightful statistics on retirement savings, as observed in their corporate defined contribution retirement plan business, as well as 16.2 million IRA accounts. In the analysis, Fidelity spotlights the problem of cashing out and draws attention to the 6000+ Fidelity plans with 2.2 million participants who have adopted auto portability, through October 2024.

What Optional SECURE 2.0 Provisions Are Plan Sponsors Most Likely to Adopt?

NAPA Net's Ted Godbout reports on the results of a new plan sponsor survey, conducted by Fidelity Investments "to gain a better understanding of what optional provisions of the SECURE 2.0 Act that plan sponsors are most likely to adopt." The survey found "high interest" in auto portability, a service which they expect to be a "standard offering." Godbout also writes that, "for larger plans, withdrawals for emergency expenses was replaced by auto-portability by corporate plan sponsors" and that "plan sponsors in finance and manufacturing both ranked auto-portability as a top option." The Fidelity report can be downloaded here.

4 Key Findings from the New Auto Portability Simulation

Writing in 401k Specialist, RCH's Tom Hawkins summarizes the four key findings from the firm's Auto Portability Simulation (APS), a discrete event simulation that models the impacts of auto portability over a 40-year period, and are detailed in a new white paper, Revisiting the Auto Portability Simulation: The Impact of the Portability Services Network, SECURE 2.0 and Expanded Access. Hawkins contends that the new APS analysis has improved the model’s predictive accuracy by incorporating new parameters that reflect “changing realities” driven by three major developments: 1) the advent of the Portability Services Network, 2) the passage of the SECURE 2.0 Act and 3) ongoing progress in expanding access to workplace retirement savings plans. The paper's key findings highlight the growth of the participant population that will be subject to mandatory distributions, as well as auto portability’s effects on reducing cashout leakage, generating incremental retirement wealth, and delivering benefits to minorities and lower-income workers.

5 Ways Employers Can Improve Retirement Readiness for Underserved Participants

PLANSPONSOR's Remy Samuels reviews new research from Alight Solutions, which outlines ways employers "can make retirement savings more accessible for workers from racial and ethnic minorities and the LGBTQ+ community, all of whom have historically fallen behind in saving for retirement." Recapping Alight's research, Samuels highlights five key ways plan sponsors can accomplish these goals, including facilitating auto portability, which advocates "working with recordkeepers in Retirement Clearinghouse’s Portability Services Network—a consortium of retirement plan service providers seeking to help workers transfer low account balances from one employer plan to the next."

Alight Solutions Releases 2023 Universe Benchmarks Report

Alight Solutions, one of the nation's largest defined contribution recordkeepers and a founding owner member of the Portability Services Network (PSN), released their 2023 Universe Benchmarks report -- the latest in a long line of annual reports that illustrate how workers are saving and investing in defined contribution (DC) plans. The report notes that cashout leakage increased in 2022, where 45% of participants cashed out, compared to 39% in 2021, while adding that the highest leakage levels were observed "almost always [in] small balances." Under the heading of trending topics and considerations, Alight also suggests that plans "add auto-portability" as it can "easily help transfer balances into the plan for new hires."

Direct link to the full 2023 Universe Benchmarks Report

Increased Cashouts at Job Separation Highlight Need for Auto-Portability

PLANSPONSOR's Remy Samuels examined recent research on 401(k) cashout leakage, published in Marketing Science and the Harvard Business Journal, and turns to co-author John G. Lynch, Jr., who provides his support for both auto portability and the Portability Services Network. Samuels writes that Lynch "encourages more recordkeepers to join the Portability Services Network, which would enable employees with smaller balances to roll over 401(k), 401(a), 403(b) and 457 accounts to a new employer’s plans as they change jobs." Referencing plan sponsors, Lynch also pointedly adds: “if the employer really cares about their employees, they should care about them when they’re on the way out the door as well.”

A (Really) Surprising Reason for High Retirement Plan Leakage

NAPA Net's John Sullivan delves into recent cashout leakage research that finds a correlation between more-generous employer matching contributions and higher incidences of leakage. Sullivan also examines auto portability, turning to RCH president & CEO Spencer Williams, who addresses the Portability Services Network (PSN), a newly-formed "independent entity that acts as a utility" to foster adoption of the new automatic feature. Williams provides updates on PSN's recordkeeper membership, and states: "[w]e expect to have the beginnings of reportable activity by the end of the year.”

Fidelity analysis finds a ‘danger zone’ for employees cashing out 401(k)s

InsuranceNewsNet's Ayo Mseka recaps a recent EBRI webinar, where Mike Shamrell, V.P. of Fidelity’s workplace investing thought leadership, presented cashout leakage data garnered from Fidelity’s defined contribution plans. Shamrell's data included extensive breakdowns of cashout leakage data, including an analysis by generational cohort, where the 'danger zone' was identified as participants between the ages of 30 and 39. According to Mseka, Shamrell cited auto portability as one of several solutions to leakage, which could also serve to "reduce the costs and burden of terminated participants."