Spencer Williams

Much has been written in the media, including this column, about the increase in mobility of today’s American workforce.

Fifteen years ago, when safe-harbor IRAs were first proposed as a destination for small, stranded 401(k) accounts that can be automatically rolled out of plans, then-U.S. Assistant Secretary of Labor Ann L. Combs spelled out what these investment vehicles were supposed to accomplish.

401(k) account cash-outs remain a potent threat to Americans’ retirement-readiness and by all accounts the U.S. Department of Labor agrees, having issued its final Prohibited Transaction Exemption (PTE) for auto portability at the end of July.

Automatic rollovers of small, stranded 401(k) savings accounts are, on the surface, helpful for plan sponsors to keep their plans lean and healthy. However, “on the surface” is the key part of the previous sentence.

On July 31st, the U.S. Department of Labor (DOL) released the final Prohibited Transaction Exemption (PTE) to Retirement Clearinghouse (RCH) for the RCH Auto Portability program, completing the regulatory framework and clearing the way for auto portability’s widespread adoption.   

This new development represents an important milestone on the path to auto portability, a private-sector innovation that will help prevent 401(k) cashout leakage, increase plan efficiencies and improve the prospects of a timely, comfortable and secure retirement for millions of Americans.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, passed by the House of Representatives on May 23, has the potential to make a positive impact on Americans’ retirement readiness. One of the bill’s key provisions involves removing restrictions on open multiple employer plans (MEPs), which would make it less costly for small businesses to offer retirement savings plans to employees.

When evaluating their defined contribution plans, plan sponsors understandably look at standard benchmarks such as rate of participation, average deferral percentage, and average account balance. However, given the highly mobile nature of today’s American workforce, sponsors should also consider tracking the average percentage of retirement savings that participants retain during their job tenure, and when they leave to join another employer.

All companies that manage personal consumer data, regardless of where they are based or what industry they are part of, are right to be concerned about cybersecurity. The scope and scale of cyberattacks continue to increase around the world, as last year’s breach compromising 50 million Facebook users demonstrated.

April 15 is just around the corner. While many Americans dread Tax Day, April 15 presents defined contribution plan sponsors with an opportunity to demonstrate their value as fiduciaries, and as financial wellness advocates.

The long-awaited Department of Labor (DOL) guidance on the legal and regulatory framework for auto portability has cleared the way for plan sponsors to further enhance and optimize their automatic rollover programs. By explicitly recognizing auto portability’s potential benefits to retirement savers, the DOL acknowledges that existing ARO programs have flaws which auto portability can fix.