A 03/29/22 hearing by the U.S. Senate Committee on Health, Education, Labor & Pensions (HELP), Rise and Shine: Improving Retirement and Enhancing Savings, focused on solutions that would enhance retirement security for Americans, particularly those who are under-served and under-saved.
Two of the four witnesses appearing before the Committee identified auto portability as a key solution to leveling the playing field for women, minorities, and lower income workers. WISER’s Cindy Hounsell and The Aspen Institute’s Ida Rademacher both offered testimony highlighting the benefits of the new plan feature, which automatically moves small 401(k) balances from the prior plan to the new employer plan when participants change jobs.
Cindy Hounsell’s Testimony
In her testimony, Cindy Hounsell, the President and Founder of the Women’s Institute for a Secure Retirement (WISER), focused on “workable solutions to the challenges women face” in securing adequate retirement income. Within her set of policy prescriptions for women, Hounsell prioritized three important “interventions” including: 1) emergency savings accounts, 2) targeted retirement literacy, and 3) auto portability.
Hounsell characterized auto portability as a “technology-based solution to prevent workers who change jobs from cashing out their retirement savings” and added that “more financially challenged demographic groups – those with the smaller balances – lower their cash-out rates more than other groups when auto portability is a feature of the plans.” In her written testimony, Hounsell provided lawmakers with additional background on auto portability, stating that, within the demographic groups most adversely affected by cash-out leakage – lower-wage earners, Blacks, Hispanics and women – “auto portability changes that” by working to preserve more of those savings for retirement.
Ida Rademacher’s Testimony
Ida Rademacher, Vice President, The Aspen Institute & Executive Director of the organization’s Financial Security Program, noted the “convergence on the importance of the retirement savings system for building inclusive wealth” and pointed to the “wide gaps” that exist for “households of color, women, and low-income households” and their ability to generate wealth via retirement savings.
Like Hounsell, Rademacher laid out a prioritized list of policy solutions, including increasing access to workplace retirement savings, improving the availability of emergency savings accounts, offering lifetime income streams in retirement and delivering portability of retirement savings. Regarding auto portability, Rademacher first drew attention to the ill effects caused by fragmentation within the retirement savings industry, testifying: “as workers change jobs with increasing frequency over the course of their working life, leaving a variety of small accounts scattered across different financial institutions, solutions like auto portability and a retirement savings lost & found database are vital to ensure the retirement savings system is designed for the needs of the 21st century workforce.”
Importantly, in her written testimony Rademacher noted that “both the National Urban League and the National Association for the Advancement of Colored People (NAACP) recently endorsed auto-portability as an important step to closing the racial wealth gap.”
Key Takeaway
The latest Senate HELP Committee hearing builds on previous Senate hearings and fuels growing momentum for auto portability among legislators, policymakers, advocacy groups, providers and plan sponsors – all of whom increasingly view auto portability as an essential requirement to boost retirement security for under-served and under-saved Americans.