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Auto Portability - Recent Developments
Find the most-recent auto portability media coverage and developments.
Why Auto Portability is Good for Your Retirement
Writing in IRIS, Joseph Conroy, CFP of Synergy Financial Group, examines auto portability from the perspective of the participant. Comparing participant outcomes that occur under the current system vs. those under auto portability, Conroy concludes that auto portability's benefits to participants are compelling, stating that "auto portability would be a benefit for retirement savers, both in the prevention of leakage and in streamlining accounts."
PLANSPONSOR: Senate Testimony Supports Auto Portability
PLANSPONSOR's Rebecca Moore, covering testimony offered to the Senate Special Committee on Aging, reports that Gene L. Dodaro, Comptroller General of the United States and head of the Government Accountability Office (GAO) "touted automatic enrollment and auto portability as ways DC plan enrollment and contribution levels can be encouraged." The Committee's hearing, held 2/6/19, addressed the topic "Financial Security in Retirement: Innovations and Best Practices to Promote Savings" and also included testimony from John Scott (The Pew Charitable Trusts), Linda K. Stone (WISER) and Denis St. Peter (CES, Inc.).
EBRI Reassesses Whether DC or DB Plans Are Better for Participants
PLANSPONSOR's John Manganaro examines EBRI Research Brief #473, released 2/7/19, which compares the outcomes of participants in automatic enrollment 401(k) plans versus defined benefit (DB) plans. Manganaro quotes the study as finding that DB break-even accrual rates required for equivalency to their 401(k) counterparts are "rarely less than 1.5% of final pay." Under a scenario where auto portability is combined with 401(k) plans, the DB break-even accrual rates increase further to deliver equivalency, with auto portability's impact "greatest among the lowest income quartile."
RCH's Spencer Williams on Auto Portability's Benefits to Minorities
In his latest article in Employee Benefit News, RCH President & CEO Spencer Williams addresses the headwinds facing minorities in saving more for their retirement, including significantly higher rates of job turnover and cash-out leakage. Building on statements by RCH Chairman Robert L. Johnson at a December 2018 White House event, Williams makes the case that – for minority savers – auto portability could preserve up to $1.4 trillion in retirement savings, over a generation. Williams concludes that auto portability represents the “best, and easiest, way for sponsors and their service providers” to address the problem.
PLANSPONSOR: Groom's Saxon Welcomes DOL's Auto Portability Guidance
In the January 2019 edition of PLANSPONSOR magazine, Groom Law Group's Stephen Saxon welcomes the U.S. Department of Labor's (DOL) November 2018 guidance on the RCH auto portability program. The DOL, says Saxon, "clarifies important questions about the fiduciary implications for plan sponsors" and provides "much welcome comfort" to plan fiduciaries considering the program. Saxon concludes his analysis by stating that "auto-portability will have a positive, long-term impact on the U.S. retirement system by reducing leakage and enabling American workers to consolidate their small retirement balances on an efficient basis."
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Kiplinger: How to Avoid Cashing Out Your 401(k)
Kiplinger's Brendan Pedersen examines the favorable impact that the U.S. Labor Department's ruling on auto portability could have on 401(k) cashout leakage. At a macro level, Pedersen cites figures from Deloitte Consulting, which show that cashouts by workers with less than $5,000 saved could cost Americans $2 trillion over the next decade. At the individual level, Pedersen uses an illustration provided by Mike Giefer, CFP, who states “if they don’t retire for 40 years, that money invested could have been worth $75,000.”
NAPA Net Cites EBRI Research on Women, Auto Portability
In his 1/24/19 NAPA Net article "EBRI: Single Women Face Significant Retirement Savings Shortfall", reporter Ted Godbout joins other media outlets in analyzing new EBRI research that projects a significant retirement savings shortfall for Generation X's women -- particularly single women and widows. Godbout also draws attention to EBRI's finding that auto portability, when applied to the problem, will result in "at least a double-digit percent reduction in the shortfall for all groups."
PLANSPONSOR: EBRI Links Women's Retirement Security, Auto Portability
PLANSPONSOR's Rebecca Moore examines new EBRI research that demonstrates the "large impact" that auto portability can have on reducing Gen Xer women's retirement savings shortfalls. When EBRI adds auto portability to their projection model, Moore reports that the average shortfall for those with 21 to 30 years of future DC eligibility is reduced by 21% for single females to as much as 38% for widowers.