News

Will 401k Auto-Portability Became A Cure-All Or A Fiduciary Headache?

Fiduciary News' Chris Carosa examines 401k auto portability, attempting to determine whether the new automatic feature represents a "cure-all" or could become a fiduciary "headache" for risk averse plan sponsors. Carosa turns to an assortment of legal minds, advisors and industry pundits who weigh in on the question. On the positive side, Carosa's sources affirm that "auto-portability does offer plenty of advantages, especially to plan participants" in reducing cashout leakage, preserving small-balance retirement savings and helping plan sponsors to "benefit from auto-enrollment through reduced administration expenses incurred supporting inactive accounts." On the flip side, naysayers cite auto portability's negative consent, the potential for creating a "slippery slope" towards "government overreach" and its supposed inability to accommodate retirees.

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New SECURE 2.0 regulations now in effect in 2024: Is your 401(k) in compliance?

Writing in BenefitsPRO, Jennifer Tanck, Executive Vice President of Pensionmark, informs readers about the key SECURE 2.0 provisions that will affect plan sponsors in 2024. Addressing auto portability, Tanck writes that "[t]he SECURE 2.0 Act now codifies automatic portability" and "permanently approves the negative consent of rollovers of small balances to a terminated employee’s new employer through the Retirement Clearinghouse. The threshold for these rollover amounts has been increased from a maximum of $5,000 to $7,000 for 2024."

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Auto portability is poised to make an even bigger impact in 2024

Writing in Employee Benefit News, RCH President & CEO Spencer Williams looks ahead to the New Year, when a key provision of the SECURE 2.0 Act—increasing the limit on small 401(k) accounts subject to automatic rollovers into safe-harbor IRAs from $5,000 to $7,000—goes into effect. While this development will cause more job-changing participants to be subject to automatic rollover provisions, the advent of auto portability could mean that these participants could ultimately fare much better, as auto portability's adoption accelerates. Williams references new results from RCH's Auto Portability Simulation (APS), which indicate that the new provisions -- when combined with auto portability -- could deliver even greater benefits in terms of reducing cashout leakage and preserving retirement savings, and offers plan sponsors with two New Year's resolutions to proactively respond to the changes.

Previously featured in RCH's Consolidation Corner Blog

Retirement Clearinghouse Notes 4 Key Findings on Auto-Portability

Writing in PlanAdviser, Natalie Lin reports on Retirement Clearinghouse (RCH) releasing an updated version of their Auto Portability Simulation (APS). Lin observes that the new simulation model incorporates new data and assumptions and is supportive of the industry-led initiative undertaken by the Portability Services Network, a consortium of large defined contribution recordkeepers dedicated to auto portability's adoption. In addition to summarizing the study's key findings, Lin writes that "[t]he study supports the consortium’s ultimate goal of getting all retirement plans in the country to automatically port over small balances instead of cashing them out to the participant or pushing them into an individual retirement account."

Auto Portability to Help Boost Wealth by $1.6 Trillion Over 40 Years

NAPA Net's Ted Godbout covers a new study released by Retirement Clearinghouse -- Revisiting the Auto Portability Simulation: The Impact of the Portability Services Network, SECURE 2.0 and Expanded Access -- which addresses the findings from a newly-updated discrete event simulation which models the 40-year results of auto portability. Godbout summarizes the four key findings noted in the study, which include an increase in the number of affected job-changers, greater reductions in cashout leakage, an increase in incremental retirement savings preserved, and a more positive impact of auto portability upon minorities.

Small-Balance Retirement Account Holders to See Significant Changes in 2024

PLANSPONSOR's Remy Samuels covers developments surrounding small-balance accounts, including the 12/29/23 increase of the mandatory distribution threshold from $5,000 to $7,000, the recent announcement by the Portability Services Network (PSN) of live operations, and the release by Retirement Clearinghouse (RCH) of an updated version of its Auto Portability Simulation (APS). Samuels briefs her readers on all of these developments, and offers a summary of key results from RCH's new APS model.

4 Key Findings from the New Auto Portability Simulation

Writing in 401k Specialist, RCH's Tom Hawkins summarizes the four key findings from the firm's Auto Portability Simulation (APS), a discrete event simulation that models the impacts of auto portability over a 40-year period, and are detailed in a new white paper, Revisiting the Auto Portability Simulation: The Impact of the Portability Services Network, SECURE 2.0 and Expanded Access. Hawkins contends that the new APS analysis has improved the model’s predictive accuracy by incorporating new parameters that reflect “changing realities” driven by three major developments: 1) the advent of the Portability Services Network, 2) the passage of the SECURE 2.0 Act and 3) ongoing progress in expanding access to workplace retirement savings plans. The paper's key findings highlight the growth of the participant population that will be subject to mandatory distributions, as well as auto portability’s effects on reducing cashout leakage, generating incremental retirement wealth, and delivering benefits to minorities and lower-income workers.

Your Old 401(k): Out of Sight, Out of Mind and Out of Money

Journalist Brian J. O'Connor, writing in the New York Times, highlights the problems faced by job-changing 401(k) participants who leave behind small balances with their former employers, where they can be subject to their mandatory distribution provisions. O'Connor turns to RCH President & CEO Spencer Williams, who sets the system-wide value of lost savings at $1.5 trillion. The piece also mentions the formation of the Portability Services Network, a "voluntary network includes Alight Solutions, Empower, Fidelity Investments, Principal, TIAA and Vanguard and uses technology from Retirement Clearinghouse."

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Also featured in ZeroHedge, and BNN Breaking