Thought Leadership

Vanguard moves to automatically transfer small 401(k) balances

Writing in MarketWatch, Alicia Munnell, Director of the Center for Retirement Research at Boston College celebrates the news that Vanguard will offer RCH Auto Portability to their plan sponsor clients and participants, stating: "[t]his is a win for Vanguard and its customers, for Retirement Clearinghouse, which has been working on this project for many years, and for the retirement system as a whole" -- adding "[t]his initiative should dramatically reduce leakages and increase 401(k) balances." An astute observer of trends in the retirement sector, Munnell recounts the history of auto portability, from inception to regulatory approvals to its present state, where recordkeepers are now confidently adopting the financial technology. Munnell closes her piece writing: "it is lovely to see a win for the 401(k) system."

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A leap forward for auto portability

Greg Long, industry thought leader and head of Alight Solutions' head of Public Policy & Defined Contribution Public Sector, takes to LinkedIn to provide his viewpoint on auto portability. Citing another major recordkeeper's announcement that it's joining the RCH auto portability network, Long takes stock of that positive development, and uses it to advocate for making auto portability "the standard for all small, terminated accounts."

Alight Solutions Releases New Study on Small-Balance Cashouts

Alight Solutions, a leader in defined contribution plan services, released a new study that addresses the problem of small-balance 401(k) cashouts. The study, The impact of 401(k) cash-outs on retirement income, examines the very high prevalence of small-balance 401(k) cashouts, the low incidence of 401(k) roll-ins and provides illustrations that depict the importance of preserving these small balances for retirement. Finally, the study points to RCH Auto Portability as an important "emerging new tool" in the fight against cashouts, for which Alight is "pleased to be an early adopter."

Mercer Exec: Auto Portability 'Essential for Shoring Up US Retirement System'

In his capacity as Head of US Defined Contribution and Financial Wellness Research, Mercer's Neil Lloyd notes the recent emergence of serious industry dialogue on plan-to-plan retirement savings portability. Long a proponent of portability, Lloyd recognizes the inherent problems associated with holding multiple retirement saving accounts. In his piece, Lloyd strongly advocates for auto portability, stating that it "might be the solution to less efficient small-balance accounts." Lloyd goes further, opining that auto portability should be considered a legislative priority, writing that "SECURE ACT 2 will be vastly improved if provisions further supporting auto-portability are included."

Michael Barry Gives DOL an 'A' on Auto Portability

In his ongoing "Barry's Pickings" column for PLANSPONSOR, Michael Barry, president of O3 Plan Advisory Services LLC, gives the U.S. Department of Labor an 'A' for its November 2018 issuance of a proposed Prohibited Transaction Exemption (PTE) and an Advisory Opinion on Auto Portability. Barry adds: "as a long-time advocate of the establishment of a clearinghouse, I view this as very good news."

DOL Auto-Portability Approval May Ease Rollovers, Reduce Missing Participants

Arris Reddick Murphy, Contributing Editor to HR Daily Advisor, and senior counsel with FedEx Corp.’s Tax & Employee Benefits Law group, examines the potential impact of the Department of Labor's recent actions towards RCH's auto portability program. Murphy outlines the strategic benefits for plan sponsors who participate in the auto portability program, including a reduction in small accounts, missing participants and uncashed checks. Murphy also points out the importance of participation of both plan sponsors and service providers, stepping through various aspects of the program, while offering planning tips for participating plan sponsors.

LIMRA's Money In Motion Study Highlights State of Roll-Ins

LIMRA Secure Retirement Institute issues their "Money In Motion" study, highlighting retirement savings flows, including the low levels of defined contribution transfers.

Northern Trust Research: The $10,000 Hurdle

In March 2017, Northern Trust's Sabrina Bailey and Gaobo Pang released the study "The $10,000 Hurdle" which examines the much-improved outcomes that participants experience as their 401(k) accounts cross a $10,000 balance threshold. Bailey and Pang provide empirical evidence for the existence of the threshold, speculate about the behavioral dynamics at work, and finally, suggest means to accelerate asset accumulation, so that the threshold can be crossed earlier.