Public Policy

Worried About Losing Your Old 401(k)s? ‘Portability’ Measures Can Help

Yahoo Finance's Mike Obel takes stock of portability measures that could remove roadblocks for Americans "to take along their retirement funds more easily throughout their careers." Obel cites both draft legislation in Congress, as well as Vanguard's 9/21/21 announcement of plans to work with Retirement Clearinghouse on auto portability, which is expected to launch in mid-2022.

Also featured in SmartAsset.com

Small retirement accounts, prone to cash-outs and getting lost, a growing problem

InvestmentNews correspondent Emile Hallez reports on a retirement study published on 9/21/21 by the Brookings Institution, examining the problem of small accounts. While the paper examined a myriad of potential policy solutions to the problem, it acknowledged "private-sector" efforts by Retirement Clearinghouse to implement auto portability. On the same day the Brookings' paper was released, Hallez also notes the announcement by Vanguard that it will offer RCH Auto Portability, the private sector solution, and joining Alight Solutions.

401k Auto Portability’s Significant Benefits to Pending Legislation

Writing in 401k Specialist Magazine, RCH's Tom Hawkins recaps a 9/13/21 Employee Benefit Research Institute (EBRI) webinar (The Impact of Proposed Legislative Changes on Retirement Income Adequacy). In the webinar, EBRI Research Director Jack VanDerhei presented an analysis of pending legislative changes, including automatic contribution plans and arrangements (ACPAs), paired with a refundable saver’s credit. Unsurprisingly, the benefits for these policy initiatives were quite large. However, what was truly surprising was the sheer magnitude of incremental benefits delivered by the addition of auto portability, significantly paring retirement shortfalls for 35–39-year-olds, across all race and ethnicity categories.

Beware of Unintended Effects of Retirement Savings Public Policies

Writing in 401k Specialist Magazine, RCH's Tom Hawkins examines the unintended effects that can result from retirement savings public policies that would dramatically expand access to, and participation in, defined contribution plans. While the benefits are impressive, additional undesired consequences can arise that are antithetical to the policies’ original intent, including increased cashout leakage, missing participants, uncashed checks and forgotten/stranded accounts. Understanding these highly predictable "second order" effects, Hawkins identifies plan-to-plan portability as an effective means of addressing them, while significantly boosting the overall policies’ benefits.

Refundable Saver’s Tax Credits Would Significantly Reduce Retirement Savings Shortfall—Especially for Minorities

Writing in RCH's Consolidation Corner, RCH President & CEO Spencer Williams examines pending retirement savings legislation, and focuses upon the benefits of a refundable saver's credit, which would be directly deposited into taxpayers' 401(k) and IRA accounts. Taking his analysis a step further, Williams considers the infrastructure required to transfer these funds to savers, and identifies considerable synergies with the existing technology that supports auto portability.

Don’t relegate lost and missing accounts to the lost and found — consolidate them in the retirement system

Writing in Employee Benefit News, RCH President & CEO Spencer Williams opines on draft provisions in SECURE 2.0 legislation that call for establishment of a “lost & found” – including housing sub-$1,000 balances for all terminating 401(k) participants. As proposed, Williams observes that simply moving sub-$1,000 balances to the PBGC does little to reduce cashouts or stranded savings and offers auto portability as a “far more constructive method” to reduce cashouts and to promote consolidation of retirement savings.

Also featured in Financial-Planning.com

Senate Hearing Reveals Large Employer Support for Auto Portability

RCH’s newly-appointed EVP of Public Policy, Renée Wilder Guerin finds a lot to like in the 7/28/21 Senate Finance Committee hearing, where lawmakers heard testimony on how to increase retirement savings, including tackling the longstanding problems of cashout leakage, missing participants and “forgotten” retirement savings accounts. Wilder Guerin notes that auto portability was favorably mentioned twice by Aliya Robinson (SVP, Retirement & Compensation Policy for ERIC), as a policy initiative her organization – comprised of the nation’s largest plan sponsors – supports. Coming on the heels of EBRI’s 21st Annual Retirement Confidence Survey, where nearly 9 in 10 participants indicated their preference for the feature, Senate Finance Committee testimony “bodes extremely well for auto portability’s widespread adoption, as well as the enactment of public policies that further enhance it.”

Good News: Auto Portability Prevents Cashing Out Retirement Funds

Cindy Hounsell, Founder & President of the Women’s Institute for a Secure Retirement (WISER) and Forbes contributor, writes eloquently about the woes of cashout leakage, while offering readers good news. Auto portability, says Hounsell, is "a technology-based solution developed by Retirement Clearinghouse" that can help ensure that savers' "401(k) savings move automatically from their previous employer’s plan to their new employer’s." Hounsell cites EBRI data that pegs auto portability's system-wide benefits at $1.5 to $2.0 trillion, indicating that "much of that savings will belong to the people who need it most" including women, minorities and lower-income workers.