Thomas Hawkins

Last year at this time, our firm predicted that 2022 would be a pivotal year for retirement savings portability. It turns out we were right, but we confess to being pleasantly surprised at just how consequential (and positive) the year has been, and it’s not over yet.

Here’s a rundown of key events during 2022 that have helped to positively shape the future of retirement savings portability:

For defined contribution recordkeepers, competition has long been fierce, so it’s extraordinary when industry rivals join forces and align around a common cause.

That alignment around auto portability, embodied in the newly launched Portability Services Network (PSN), was on full display in a 12/8/22 Groom Law Group webinar. The event featured representatives from retirement industry titans and founding PSN members Alight Solutions, Fidelity Investments and the Vanguard Group, joined by Retirement Clearinghouse (RCH).

In the retirement community, momentum is growing to make our 401(k) system more inclusive and to ensure that retirement savings are more equitable.

I'm a big fan of 401(k) plan consultants, who’ve been forceful advocates for the adoption of best practices at leading retirement plan sponsors. So, it’s surprising to me that, when it comes to automatic rollover programs, consultants sometimes miss the mark, at least in terms of participant outcomes.

The observance of National 401(k) Day on Friday, September 9^th is an opportunity to reflect on the long-running, highly successful public-private collaboration that has fostered the rapid ascendance of America’s 401(k) system.

It’s my belief that this partnership will continue to drive innovations that will expand and improve the 401(k) system for millions of Americans – not only helping them to save more but preserving more of their savings for retirement.

August 14^th is National Financial Awareness Day, and 401(k) plan sponsors have been instrumental in increasing the financial awareness of millions of Americans by providing them with access to workplace retirement savings plans that materially enhance their prospects for a timely and comfortable retirement.

Winston Churchill, once referring to the intentions of the former Soviet Union, stated: “it is a riddle, wrapped in a mystery, inside an enigma.” For 401(k) plan sponsors, that’s an apt description for the problem of missing participants.

Selecting an automatic rollover IRA provider used to be easy.

Most 401(k) plan sponsors simply accepted the solution offered through their recordkeeper or TPA. Others performed due diligence, using a limited set of criteria including basic fees, investment options and accountholder service.

Over the past 15 years, a very large (250,000+ participants) 401(k) plan sponsor that our company has had the opportunity to serve has been highly successful in delivering improved participant outcomes by incrementally adopting a full program of retirement savings portability.

Were the plan’s experience set to music, it could be described as “401(k) Portability in Four Movements” – opening with discordant levels of cashout leakage but quickly building towards more satisfying participant outcomes, including substantial improvements in the preservation and consolidation of retirement savings.

I’m convinced that Auto IRA programs, despite their potential size and strength, suffer from an obvious Achilles’ heel: a lack of retirement savings portability.  

Without addressing their portability problem, Auto IRA programs could expand, but may never reach their full potential, housing large numbers of churning, small-balance accounts. However, with adequate support for portability both into and out of these programs, they could dramatically increase the odds that they deliver on their promise of building incremental retirement wealth for millions of Americans.