Media Coverage

Fintech Friday: Auto-Portability Continues to Gain Traction

NAPA Net's John Sullivan notes that "the movement to auto-portability continued to grow" as Principal announced it had joined with 5 other large recordkeepers and Retirement Clearinghouse (RCH), becoming one of the seven owning members of the Portability Services Network (PSN), launched in October 2022. In his piece, Sullivan quotes Robert Johnson, RCH and PSN chairman, who lauds Principal's "leadership, action, and progress to increase financial access and inclusion [that] will help more people benefit from auto-portability – in particular people of color, lower-income workers, and women, who have higher than average cash-out rates.”

Principal Joins Portability Services Network

PlanAdviser's Natalie Lin breaks down the 7/6/23 announcement by Principal that it has joined the Portability Services Network (PSN), "a consortium of retirement plan service providers seeking to help workers with lower balances transfer their workplace retirement accounts when changing employers." Lin notes that "[t]he addition of Principal means the country’s five largest recordkeepers by assets are now part of the network."

The 401(k) ‘House-Cleaning’ to Come

The increase in the automatic rollover threshold from $5,000 to $7,000, as provided for in section 304 of the SECURE 2.0 legislation, will become effective for mandatory distributions made after December 31, 2023. What will be the impact of these provisions, if fully embraced by plan sponsors? One thing is certain – on both a one-time and ongoing basis, far more terminated participants will be subject to the automatic rollover provisions of their former-employers’ plans. Writing in 401k Specialist, RCH's Tom Hawkins explores the impact of an increased threshold that, when paired with the advent of auto portability and the operational status of the Portability Services Network (PSN), could mean that small balance terminated participants will finally come out on top.

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

The New Urgency for Mitigating 401(k) Account Cash-Outs

Findings in a recent study by the Sauder School of Business at the University of British Columbia (UBC) underscore that, despite all of the media articles offering tips for how to save more for retirement, many Americans still make the self-destructive decision to cash out their savings following a job separation. RCH’s Spencer Williams, writing in the RCH Consolidation Corner blog, reminds readers that “there are solutions in place for 401(k) plan sponsors and recordkeepers to help participants avoid the all-too-easy decision to cash out their savings” including auto portability, which is also supported by substantial research demonstrating its efficacy in preventing cashout leakage.

The 401(k) “House-Cleaning” to Come

The increase in the automatic rollover threshold from $5,000 to $7,000, as provided for in section 304 of the SECURE 2.0 legislation, will become effective for mandatory distributions made after December 31, 2023. What will be the impact of these provisions, if fully embraced by plan sponsors? One thing is certain – on both a one-time and ongoing basis, far more terminated participants will be subject to the automatic rollover provisions of their former-employers’ plans. Writing in the RCH Consolidation Corner blog, Tom Hawkins explores the impact of an increased threshold that, when paired with the advent of auto portability and the operational status of the Portability Services Network (PSN), could mean that small balance terminated participants will finally come out on top.

Behind on your retirement savings? Here's one feature that can help workers catch-up

Nora Colomer, writing for Fox13 Seattle, examines the positive impact programs that increase participation -- such as auto enrollment -- on bridging the benefits and savings gap that exists among different employee communities. Colomer also references Vanguard's support for auto portability, quoting the firm in a recent statement. "Auto-portability helps plan participants receive benefits to which they are entitled by consolidating retirement accounts from various employers," Vanguard said. "For plan sponsors, this feature could help reduce the incidence of 'missing participants.'"

As Time Passes, the Gains Become Harder

RCH's Tom Hawkins, writing in 401k Specialist, observes that our nearly 45 year-old defined contribution system may face diminishing returns as it tries to generate future growth, and should focus on quality and efficiency as it simultaneously expands access. Using fitness as an analogy, Hawkins offers a "workout plan" for the DC system, including plugging leakage through increased portability and emergency savings, while fostering increased retirement savings consolidation to avoid an explosion in small accounts. When combined with expanded access initiatives, these measures can dramatically increase Americans' retirement security, over and above expanding access alone.