Consolidation Corner

Without seamless plan-to-plan portability in place to preserve retirement savings when a participant changes jobs, many employers are unwittingly paying “exit bonuses” to terminated employees that they may never have intended to pay.

It’s become widely-accepted that retirement savings portability is proven to address the small account problem for 401(k) plan sponsors, as well as preserve participants’ savings currently lost to cashout leakage.

However, the concept of retirement savings portability is relatively new. At year’s end, most plan sponsors’ attention will be focused on other plan design issues, such as auto enrollment/escalation, the lineup of investment options, enrollment, education, retirement income solutions and so forth. 

On May 12^th, Retirement Clearinghouse announced the National Retirement Savings Cashout Clock, a virtual clock that calculates 2017 year-to-date cashout leakage from America’s defined contribution system in real time.

If you’re like most homeowners during these dog days of summer, you’re not just basking in the sunshine or swimming in the pool with your family. You also have a fight on your hands—the war against the dandelions that invade and attempt to occupy your entire lawn every year at this time.

On July 11^th, 2017, a small group of retirement services professionals at Retirement Clearinghouse (RCH)  successfully conducted the first-use of a new and important financial technology.  Known as “locate & match” -- the technology represents a breakthrough in the ability to automatically move small balances forward in America’s defined contribution system, and forms the backbone of RCH Auto Portability.

In January 2016, this blog published a post on the November 2015 letter from Senator Patty Murray (D–WA) of the Senate HELP committee, signed by a bicameral group of Congressional members, urging then Department of Labor (DOL) Secretary Thomas Perez to encourage the DOL’s Employee Benefits Security Administration to issue guidance on auto portability.

Everyone, it seems, is concerned about cybersecurity these days, and with good reason. Each week seems to bring a new round of headlines, making it clear that identity theft and criminal cyber activity have become persistent features of our lives. 

The victims of cyber-crime can be wide-ranging, including governments, industry sectors, corporations of all sizes and individuals. The sources of cyber threats are equally diverse, originating from rogue nation-states, crime cartels, “lone wolf” hackers and even disgruntled employees.

If you think of retirement savings as a key part of a healthy retirement, then anyone who has prematurely cashed out 401(k) savings during their working life has suffered a compound fracture that will require several stages of therapy to fully rehabilitate. But a cash-out isn’t the only impediment to a financially secure retirement for these hardworking Americans.

In recent months, our attention has been drawn to some deserving public policy initiatives that would dramatically expand access to workplace retirement savings accounts and address the “access gap” encountered by millions of American workers who are presently offered no such option.

Auto Portability is the routine, standardized and automated movement of an inactive participant’s retirement account from a former employer’s retirement plan to their active account in a new employer’s plan. By dramatically reducing cashouts and improving retirement readiness, Auto Portability will deliver broad benefits to America’s defined contribution system, its participants and to the entire American economy.

But who benefits from Auto Portability, and how?