News

Vanguard says one 401(k) transfer mistake can erode retirement savings

Writing in TheStreet, Damilola Esebame notes that cashing out a small 401(k) during a job change is one of the costliest retirement mistakes workers make — and that auto portability is proving to be a genuinely effective antidote. Esabame spotlights the Portability Services Network (PSN) as a clear success story: Vanguard's analysis of 83 adopting employers found that cash-outs among workers with balances under $1,000 plummeted from roughly half to below 10% once their plans joined the network, with high-turnover, lower-income workers standing to benefit the most. By automatically locating a departing worker's new employer plan and consolidating eligible balances under $7,000 rather than stranding them in default IRAs or pushing them toward taxable cash-outs, PSN has already processed more than 53,000 transactions totaling $71.3 million since November 2023, keeping small savings compounding inside the retirement ecosystem instead of leaking out of it.

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Advisor Insights: Election Weather, a Fee War, and Inflation’s Return

The Motley Fool's advisor newsletter surveys the week's market headlines while closing with a practical practice-management note highlighting an encouraging development in retirement plan administration: auto portability delivered through the Portability Services Network (PSN). The piece praises how this industry-led network automatically moves small 401(k) balances into a worker's new employer's plan rather than letting them leak out of the system, noting that for balances under $1,000 it slashed cash-outs from roughly 50% down to about 9%. Framed as an easy win for advisors, the article encourages practitioners to ask their business-owner clients whether their recordkeeper participates in PSN and whether offboarding paperwork explains departing employees' options in plain English — positioning auto portability as a simple, high-impact way to keep savers' money invested where it belongs.

Small 401(k) Balances Remain at Risk Despite Progress on Auto Portability

401kTV's Fred Barstein examines recent research on traditional safe harbor IRAs, revealing ongoing problems with disengaged accountholders. The article highlights encouraging progress for Portability Services Network (PSN) and auto portability, showing that the program is significantly reducing retirement savings leakage when workers change jobs. In Vanguard plans participating in PSN, cash-out rates for departing employees with balances under $1,000 fell from roughly 50% to just 9%, demonstrating the effectiveness of automatically preserving retirement assets. While broader industry adoption and participant matching remain challenges, the story underscores that auto portability is already helping keep more Americans connected to their retirement savings and has the potential to deliver even greater results as participation expands.

Small 401(k) balances erode after job changes, new research shows

InvestmentNews Senior Journalist Leo Almazora examines new research from Vanguard that examines early-stage auto portability results as well as a report produced by PensionBee on the number of safe harbor IRAs. Almazora notes Vanguard's finding that auto portability has had a significant, positive effect on reducing cashout leakage, but that account matching lags as the Portability Services Network continues to add plan sponsors.

Don’t Let a Forgotten 401(k) Shrink Your Future

Craig Copeland, Ph.D., Director of Wealth Benefits Research at the Employee Benefit Research Institute, is interviewed by Broadcast Retirement News (BRN) anchor Jeff Snyder, to discuss EBRI's latest research on the growing volume of safe harbor IRAs. Copeland estimates there to be from 10-20 million safe harbor IRA accounts, amounting to roughly $30 billion in assets, which typically earn very little investment return, while being subject to ongoing administrative fees. To address the problem, Copeland, referencing the Portability Services Network (PSN), states: "there is [an] auto portability program that’s been established and...is available to be used through this process. And it has to go through the IRA and, and then there’s....a network of record keepers that can join to make this a fully automated process."

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The Pension Protection Act at 20: Defaults Built for a Job You Keep

In his 20th anniversary review of the Pension Protection Act, Jack VanDerhei, Director, Morningstar Center for Retirement & Policy Studies, argues that automatic enrollment and escalation transformed retirement saving by making participation and increasing contribution rates the default experience for workers. The article highlights auto portability as an important extension of that default-based approach. By automatically moving small retirement accounts from a former employer's plan into a worker's active plan, auto portability helps reduce cashout leakage and preserve savings continuity across job changes. VanDerhei suggests the next evolution may be making contribution rates portable as well, allowing retirement-saving momentum to follow workers from one job to the next.

Automatic 401(k) rollovers reduce cash-outs, research finds — but few accounts reach new employer plans

CNBC personal finance reporter Sarah Agostino examines auto portability (as delivered by the Portability Services Network), citing recent research from Vanguard showing that auto portability reduces cashout leakage. Agostino turns to RCH's Steve Holman, SVP, PSN Strategy and Development to provide context as auto portability adoption continues to expand. Holman explains that "there have been 53,118 completed transactions, totaling $71.3 million in assets transferred from a previous employer plan to a new employer plan via auto portability."

4 reasons defined contribution recordkeepers adopt auto portability

Writing in BenefitsPRO, Steve Holman, SVP of PSN Strategy & Development, lays out the case for auto portability from the perspective of defined contribution recordkeepers. Holman identifies four important reasons why auto portability is beneficial, including 1) delivering a positive ROI, 2) differentiating their value proposition, 3) industry collaboration & reciprocity and 4) strengthening the DC system by addressing the small account problem at scale. “Auto portability” concludes Holman, “is not simply an operational enhancement – it is a foundational capability for the future of defined contribution plans.”

Previously featured in RCH's Consolidation Corner