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Auto Portability in the News
Browse the most comprehensive collection of articles in the media that feature auto portability.
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 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.
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.'"
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.
In October 2022, policymakers, financial services executives, academics, advocacy leaders, and financial technology innovators gathered for the sixth annual Aspen Leadership Forum on Retirement Savings. An in-person event for the first time since early 2020, this Forum set out to advance solutions to ensure that everyone in America can benefit from our retirement savings system. The just-released report from that meeting identifies retirement plan portability as vital to addressing the problem of job-changing and cashout leakage, and the report heaps superlatives on the newly-formed Portability Services Network, an industry-led consortium dedicated to the adoption of auto portability.
PLANSPONSOR's Remy Samuels takes on the issue of nurse retention, which is a big problem in the healthcare services industry -- where high levels of job-changing can lead to financial problems, including excessive cashout leakage. Samuels turns to Fidelity EVP Sangeeta Moorjani, who identifies components of SECURE 2.0 that may help alleviate the problem, including auto portability. SECURE 2.0 allows healthcare plan providers to offer auto portability, which will automatically transfer retirement accounts from plan-to-plan, which is "particularly beneficial for nurses with low retirement account balances." Moorjani adds: "[i]f you’ve saved [for retirement] at one hospital and you move to another hospital with a different plan sponsor, those savings travel with you."
Retirement reporter Nathan Place, writing in Employee Benefit News, suggests that auto portability could represent a solution to "botched" 401(k) rollovers, which "are a major stumbling block for retirement savings." Since auto portability is a default, automated process, "you don't have to take any action" states Yanwen Wang, a co-author of a recent cashout leakage study. Place goes on to describe the new Portability Services Network, an industry-led utility formed by leading recordkeepers, along with Retirement Clearinghouse (RCH). Place turns to two Vanguard experts for their views -- including Dave Stinnett, head of strategic retirement consulting, and Steve Holman, head of the institutional investor group.
Fox News Senior Political Analyst Juan Williams, prominently featured on live network TV, writes a FoxNews.com opinion piece, where he profiles entrepreneur Robert L. (Bob) Johnson's "better idea" for closing the racial wealth gap -- auto portability. Williams heaps praise upon Johnson and auto portability, which was brought into existence following Johnson's hire of "a veteran retirement industry executive, Spencer Williams, to create the structure for seamless transfer of 401(k) accounts." In the piece, Williams characterizes auto portability as being able "to increase Black wealth through current economic rules instead of placing distant hope in some day seeing reparations."
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