Consolidation Corner

The preservation of small-balance 401(k) accounts – particularly those under $7,000 and subject to 401(k) plans’ automatic rollover provisions – represents an important challenge for America’s retirement system.

When job-changing workers cash out or abandon these accounts in dead-end safe harbor IRAs, they lose not just immediate savings, but can forego decades of compounded growth – reducing their odds of a comfortable or timely retirement.

Sometimes it seems, the universe sends you a signal that you haven’t been wasting your time.

For me, one such signal arrived in the form of a June 2nd, 2025 opinion piece by PensionBee executive Helene O’Brien, as well as industry reporting on comments from CEO Romi Savova, both drawing attention to the participant-unfriendly nature of some safe harbor IRAs, which house the forced-out retirement savings of separated participants with balances less than $7,000.

In the retirement plan industry, we frequently discuss the challenges posed by missing participants – those former employees with outdated contact information. However, a related phenomenon often receives less attention: unresponsive participants.

April 22 marks the 55th Earth Day, a time to reflect on our relationship with the environment and the progress made in reducing waste through recycling. While society has made strides in curbing physical waste, a similar problem persists in the U.S. retirement system: the inefficient handling of 401(k) accounts when employees change jobs.

If you’re a defined contribution plan sponsor struggling with uncashed distribution checks, it can feel you’re on a never-ending treadmill.

Americans first became aware of the Saver’s Match after the ratification of the SECURE Act 2.0 of 2022, when it was introduced as the eventual replacement for the Saver’s Credit starting with the 2027 tax year. The Saver’s Match will allow qualified individuals who contribute to an IRA or participate in an employer-sponsored retirement plan to receive a 50% federal matching contribution of up to $1,000 (or $2,000 if married and filing jointly), which is deposited directly into the taxpayer’s IRA or plan.

Auto portability, delivered via the Portability Services Network (PSN), is revolutionizing retirement savings preservation by addressing the critical challenges of cashout leakage and account fragmentation.
 

As America’s retirement savings landscape evolves, two groundbreaking initiatives could be poised to converge, potentially revolutionizing the way Americans save for retirement.

​​The Saver's Match program, set to debut with the 2027 tax year, and auto portability, powered by the Portability Services Network (PSN), present a unique opportunity to address long-standing challenges in the retirement system. By leveraging the strengths of both programs, we can create a more robust and efficient retirement savings ecosystem that benefits millions of American workers.

In the world of retirement savings, auto portability has emerged as a transformative solution designed to address the persistent problem of cashout leakage – when employees cash out their retirement savings upon changing jobs, rather than moving their savings forward into their new employer-sponsored plan.

Auto portability will deliver broad-based benefits to America’s workforce, but research has shown that the new feature disproportionately benefits under-saved and underserved demographic segments, including minorities, women, lower-income and younger workers.