News

How 401(k) Plans Benefit From Auto Portability

Angela Capek is product area leader of defined contribution (DC) product platforms at Fidelity Investments, and has worked for Fidelity for 28 years in various roles focusing on product development and deployment for DC retirement plans, for which Fidelity serves as recordkeeper. Capek recently sat down with Russ Alan Prince of Financial Advisor Magazine to discuss how the auto portability solution has helped employer-sponsored DC plans make it easier for their participants to consolidate their 401(k) savings and keep their savings invested in the U.S. retirement system as they change jobs.

ERISA and Auto Features: An RSPM® Analysis of the Impact of Automatic Features on Retirement Security

The Employee Benefit Research Institute (EBRI) released Issue Brief No. 630, authored by Craig Copeland, Ph.D. The analysis utilizes EBRI's Retirement Security Projection Model (RSPM), which focuses on the impact of key "automatic" features, including auto enrollment, auto escalation -- and more recently -- auto portability. For auto portability, EBRI's analysis reveals that, in the 100% adoption scenario, there is an 11.39% reduction (improvement) in the retirement savings shortfall for the ages 35-39 cohort, and correspondingly, a 3.51% improvement in the retirement readiness rating for the same cohort.

Preventing Leakage and Improving Retirement Security: The Impact of Auto-Portability

Financial Advisor IQ writer Ellen Sheng, in her fourth article of Financial Advisor IQ's five-part special report on the impact of Secure Act 2.0 on financial advisors, examines the problem of leakage and the role of auto portability. Sheng turns to several prominent advisory professionals, all of whom voice positive views on auto portability's prospects. Sheng summarizes by writing: "[w]hile auto-portability is still fairly new, advisors are optimistic about the development. "

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Fidelity Announces Release of State of Retirement Planning Study

Fidelity Investments released its latest State of Retirement Planning Study, which reveals that the top concerns of both retirees and pre-retirees are rising cost-of-living and health care expenses. In the press release announcing the new research, Fidelity advises the next generation of retirees to "consider consolidating your retirement accounts" into an eligible qualified retirement account. The announcement goes on to state: "[t]o make it easier, for small retirement accounts of $7,000 or less, Fidelity and other recordkeepers have collaborated with the Retirement Clearinghouse (RCH) to accelerate the adoption of ‘Auto Portability,’ a feature that automatically rolls over savings to a new workplace account for workers."

The Saver’s Match and Auto Portability: A Powerful Combination

Writing in 401k Specialist, RCH's Tom Hawkins addresses two groundbreaking retirement savings initiatives could be poised to converge, potentially revolutionizing the way Americans save for retirement. The Saver's Match program, set to debut with the 2027 tax year, and auto portability, powered by the Portability Services Network (PSN), present a unique opportunity to address long-standing challenges in the retirement system. "By leveraging the strengths of both programs", Hawkins writes, "we can create a more robust and efficient retirement savings ecosystem that benefits millions of American workers."

The Accelerating Adoption of Auto Portability: A Market Adoption Theory Perspective

RCH’s Tom Hawkins, writing in 401k Specialist, examines the accelerating adoption of auto portability from the perspective of the tried-and-true theory of market adoption. Hawkins takes the position that auto portability is “on the cusp of becoming a mainstream feature in retirement plans” as it transits the innovator/early adopter phase and moves into the early majority phase, as described in the theory’s framework.

Employers tweak key 401(k) provision to reduce uncashed checks

Pensions & Investments' Margarida Correia addresses the ongoing dilemma of uncashed distribution checks, finding that many plan sponsors have begun to accept that cashing out balances under $1,000 is a bad idea. Correia also notes that employers can address the problem "by joining an automatic-portability service known as the Portability Services Network. If an employee moves to an organization that is part of the network, his or her retirement account balance will automatically be transferred to his or her new employer’s retirement plan, even if the amount is less than $1,000." Correia also notes Alight research that indicates that "more than half of employers (52%) reported they were either very or moderately interested in the...service."

The Compelling Case for Women and Auto Portability

Writing in 401k Specialist, RCH's Tom Hawkins describes research indicating that a "compelling case" can be made for the importance of auto portability to women, who face unique retirement savings challenges that auto portability can help address. Hawkins cites the results of the Auto Portability Simulation (APS), which indicate that, on an annual basis, auto portability would preserve the savings of 2 million women participants. Over a generation, 111 million women would preserve their retirement savings, worth about $753 billion in today’s dollars. Offering these figures as evidence, Hawkins argues that "women can benefit disproportionately from the widespread adoption of auto portability."