News

Automated features in workplace retirement plans can close savings shortfalls

Pensions & Investments reporter Margarida Correia recaps the latest retirement research from EBRI, which examines the impact of key "automatic" features utilized in defined contribution retirement savings plans. Correia notes that the EBRI report indicated the combination of "automatic enrollment, automatic escalation and automatic portability -- the retirement saving shortfall would close by 16%."

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EBRI Analysis Tool Highlights Impacts of Automatic Enrollment

Amanda Umpierrez, writing for 401k Specialist, covers the release of EBRI Issue Brief 630, which examined the impact of automatic features in retirement plans by using its Retirement Security Projection Model (RSPM). Umpierrez notes that the analysis looked at several automatic features -- including automatic enrollment, automatic escalation and automatic portability. She notes that automatic portability "can significantly lower shortfalls for participants" and that "pans who adopt auto-portability features could see a reduction in the retirement saving shortfall by over 11% for those ages 35 to 39."

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.