News

What’s missing from the SECURE Act? A provision to plug cash-out leakage

In his latest article in Employee Benefit News, RCH President & CEO Spencer Williams identifies a key, missing element in pending retirement legislation: provisions to plug cash-out leakage. Citing both the SECURE Act of 2019 and the Automatic Retirement Plan Act of 2017 (ARPA), Williams applauds their commendable goals to expand coverage, but takes them to task for failing to incorporate provisions that plug leakage. To make his case, Williams cites two recent EBRI studies, both finding that auto portability – when combined with legislative proposals that expand access – vastly improves their public policy benefits by stemming leakage and by dramatically reducing the nation’s retirement savings shortfall.

5 Positive Retirement Plan Proposals Currently Circling Washington

401k Specialist Editor-In-Chief John Sullivan reports on EBRI's 7/11/19 analysis of DC legislative proposals, including mandatory coverage (auto-IRAs), immediate annuities, open MEPs and changes to required minimum distributions -- all of which deliver significant retirement public policy benefits, as measured by their simulated reduction in the retirement savings shortfall (RSS). Importantly, Sullivan singles out auto portability as providing the most-impressive benefits, noting: "if a full auto portability scenario is assumed on top of all of the aforementioned changes to the retirement system, the average retirement deficit is simulated to decrease by 27.1 percent."

P&I: EBRI Study Examines Legislative Proposals, Highlights Benefits of Auto Portability

Pensions & Investments' Hazel Bradford reports on the latest EBRI research to examine legislative proposals, including auto-IRAs, that would expand retirement plan coverage. The EBRI study, notes Bradford, finds that "along with mandating that employers with more than 10 workers provide access to auto IRAs and raising the IRS' auto-escalation cap to 15% from the current 10%, EBRI calculated that auto-portability of all defined contribution assets through a clearinghouse would reduce the retirement deficit by 27.1%." Bradford further quotes EBRI Director of Research Jack VanDerhei, who adds: "[w]ith that combination, we can take care of a quarter of the retirement deficit alone for that age cohort."

Legislative Proposals Could Help Retirement Income Adequacy: EBRI

In her 7/12/19 article, PLANSPONSOR's Rebecca Moore reports on the latest EBRI research to address legislative proposals that expand access to employer-sponsored retirement plans. Once again, the EBRI findings reveal the highly-beneficial, additive impact of auto portability, when considered in tandem with other policy initiatives. The EBRI analysis, which examined various scenarios involving the widespread adoption of auto-IRA programs, found that adding auto portability to the mix resulted in the youngest cohort (35-39) realizing a reduction in their retirement savings shortfall (RSS) of 27.1% under auto portability, vs. 17.3% without the auto portability feature.

Also featured in PlanAdviser.

8 things to know about your 401(k) when changing jobs

Bankrate's Dana Dratch offers readers a list of 8 key things to know about their 401(k) accounts when changing jobs. While 401(k) accounts "are designed to be portable" Dratch acknowledges that "moving [a] 401(k) is more challenging" than most realize. Dratch provides a solid overview of participants' options, counsels them against cashing out, and cites Retirement Clearinghouse's 2017 research that indicated more than 30% will take this unfortunate action following a job change.

Why 401k Cashout Leakage is a Crisis

In his five-part series in 401k Specialist, RCH's Tom Hawkins sheds light on the problem of cashout leakage, a silent crisis that unnecessarily robs millions of Americans of their retirement security. In his first article, Hawkins addresses the fundamentals of cashout leakage -- defining it, clearing up common sources of confusion, and identifying why the problem continues to persist.

Rolling Over Retirement Assets Creates Greater Retirement Income Adequacy

PLANSPONSOR's Rebecca Moore examines new research from EBRI that quantifies the beneficial impact of retirement savings portability, via rollovers to IRAs or to other DC plans. In EBRI's analysis, every age cohort realized significant increases in retirement income adequacy when their balances moved forward, highlighting the importance of keeping balances in the retirement system and avoiding cashout leakage. Tying EBRI's analysis to related regulatory initiatives, Moore noted Retirement Clearinghouse's pending, prohibited transaction exemption (PTE) for the use of their auto portability solution.

Also featured in PlanAdviser

Wall Street Journal: Moving Your 401(k) Could Get Easier

In her 6/10/19 column in The Wall Street Journal, Bailey McCann examines pending regulation from the U.S. Department of Labor on the RCH Auto Portability program, designed to reduce leakage and "help workers bring their retirement accounts with them as they change jobs." McCann quotes RCH founder, President & CEO Spencer Williams, and credits RCH for "develop[ing] the platform that would do the automatic transfers." Also expressing their support are Matthew Drinkwater, Director of Retirement Research at the LIMRA Secure Retirement Institute, and Alicia Munnell, Director of the Center for Retirement Research at Boston College.