News

What You NEED to Know About Auto Portability: ASPPA Annual 2024

Reporting from the 2024 ASPPA Annual Conference, ARA's John Sullivan recaps a breakfast session, where Fidelity Investments’ TPA Programs Director Beth Robinson offered her perspective on auto portability, as delivered by the Portability Services Network. Robinson addressed the problems of cashout leakage, frequent job-changes and systemic friction that stand in the way of preserving small balances, a problem that disproportionately affects underserved and under-saved demographics. Robinson also offered attendees a primer on how auto portability works, including participant communications and the subsequent commencement of network locate-and-match processes.

Job transitions slow retirement savings

New research from the Vanguard Investment Strategy Group finds that the impact on retirement savings from those who switch jobs frequently can be quite significant, and may be contributing to a "substantial slowdown in savings" for job-changers. After providing a quantitative assessment of the problem, the Vanguard research goes on to identify potential solutions, including the establishment of individual default savings rates, which the reports states could "involve the expansion of automatic portability via the Portability Services Network to include additional data feeds regarding the participant’s saving rate at their prior employer. This could enable savings elections to transfer from plan to plan without participant engagement."

Link to full report

4 Compelling Reasons for Plan Sponsors to Adopt Auto Portability

Writing in 401k Specialist, RCH's Tom Hawkins offers plan sponsors four compelling reasons to adopt auto portability. Hawkins cites the groundswell of support that auto portability has already received from the retirement industry, from legislators and regulators, as well as the thousands of plan sponsors who have already adopted, advising plan sponsors that they need not fear "being first" when they adopt. By adopting, they'll be acting in their plan's best interests and in the interests of its participants, who've expressed a strong desire for the new feature.

Safe-harbor IRAs don't offer a long-term saving solution

Writing in Employee Benefit News, RCH and PSN President & CEO Spencer Williams reflects on the 20-year history of safe harbor IRAs, which were intended to be "a temporary solution to the problem of too many small, stranded accounts in defined contribution plans." Williams provides readers with examples of the dysfunction that has occurred when safe harbor IRAs have failed to act as long-term repositories of savings, or worse, when participants cash out completely. With the advent of auto portability, Williams maintains that the new auto feature will "allow participants to maximize the time retirement savings are invested in their plan accounts—and minimize the time those balances are languishing in underperforming safe-harbor IRAs along the journey to retirement."

After 50 years of milestones, the retirement industry is bracing for yet more innovation

Writing in BenefitsPRO on the occasion of National 401(k) Day, Retirement Clearinghouse (RCH) and Portability Services Network (PSN) President & CEO Spencer Williams takes the long view -- looking back at the 50 years that have elapsed since the passage of ERISA in 1974. As Williams writes, "[m]uch has been accomplished over the previous 50 years, and more innovation is on the horizon" while proceeding to describe the "long and winding road" of innovations that have led to present day. The accumulation of innovative features, asserts Williams, has positioned the industry for the adoption of auto portability, where "people really can take their benefits with them from job to job, and keep their retirement savings vested."

Retirement Clearinghouse Releases Saver’s Match Resources

401k Specialist's Amanda Umpierrez reports on the news that Retirement Clearinghouse (RCH) has launched two new Saver's Match resources. Umpierrez writes: "[t]he resources will offer plan sponsors, plan providers and participants consolidated information about SECURE 2.0’s Saver’s Match program, as well as the Saver’s Match Estimator, a new tool that will calculate an estimated matching contribution under the program." Umpierrez also notes that, "according to a March report by the Employee Benefit Research Institute (EBRI), nearly 22 million Americans could qualify for the Saver’s Match provision in SECURE 2.0, which will take effect in 2027."

Two Saver’s Match Resources Now Available

In their 8/29/24 Product & Services Launches report, PLANSPONSOR writes that Retirement Clearinghouse (RCH) has "launched two new Saver’s Match resources that offer plan sponsors, plan providers and participants consolidated information about the Saver’s Match, as well as a new saver-focused tool—the Saver’s Match Estimator—which will calculate an estimated matching contribution under the program."

Also featured in PlanAdviser

The Risky Business of Cashing Out Plan Balances Below $1,000

Writing in 401k Specialist, RCH's Tom Hawkins examines the “risky business” of automatically cashing out sub-$1,000 balances of separated participants. Hawkins writes that the practice, “may seem like an expedient approach to rid a plan of small balances” but “carries undesirable side effects for both the plan and for its participants” including uncashed distribution checks and unnecessary cashout leakage. The best approach, continues Hawkins, is to “adopt auto portability, which delivers all of the benefits but none of the flaws of old-school automatic rollovers.”