Consolidation Corner

Despite my being a long-time, unabashed proponent of auto portability – the new plan feature that provides seamless, end-to-end portability for small 401(k) retirement savings accounts – it’s always felt like an uphill battle to bring about its widespread adoption in our 401(k) system.

While that battle is by no means over, in late 2021, I finally accepted and now firmly believe that auto portability is, in fact, inevitable.

On 12/6/21, the Employee Benefit Research Institute (EBRI) conducted day 1 of their two-day 90^th Annual Public Policy Forum.  This forum’s theme was “A Path to a More Equitable Solution: Solving the Retirement Coverage Gap” and it seems to have been highly popular, as it broke EBRI’s previous record for forum attendance. 

Following on the heels of three compelling events that occurred in 2021, 401(k) plan sponsors would be well-served by making three 2022 New Year’s resolutions that, if acted upon, could deliver significant benefits for their plans, for their participants and ultimately, for the entire 401(k) ecosystem.
 

Auto portability is a new “automatic” plan feature rapidly gaining acceptance by large defined contribution recordkeepers. While the feature is relatively new, it’s tempting to view auto portability as an “overnight success.” In fact, auto portability has been a long time in the making.  In the article and in the embedded video below, please enjoy a “brief history” of auto portability.

Traditionally, the anniversary gift for couples celebrating their 15^th wedding anniversary is crystal. When the Pension Protection Act of 2006 was signed into law 15 years ago, a crystal ball would have been useful. Although this legislation was (commendably) crafted with the best of intentions, its unintended consequences for defined contribution plan participants and sponsors continue to reverberate.
 

Auto portability can’t wait.

There are four key reasons why the new plan feature that automatically moves small balance retirement savings forward as 401(k) participants change jobs can wait no longer.

A 10/28/21 hearing by the U.S. Senate’s Special Committee on Aging, titled A Financially Secure Future: Building a Stronger Retirement System for All Americans, was highly-focused on the problems of cashout leakage, as well as its most promising solution, auto portability.

Auto portability is a new “automatic” plan feature that is rapidly gaining acceptance by large defined contribution recordkeepers serving almost 10 million participants. While the feature is relatively new, it has received a great deal of attention in the media and has also been the beneficiary of definitive regulatory guidance, promulgated by the Department of Labor (DOL).

In a press release issued 9/21/21, The Vanguard Group (“Vanguard”) announced it has engaged with Retirement Clearinghouse (RCH) to introduce the RCH Auto Portability program to their defined contribution plan sponsor clients in mid-2022.

In a 9/13/21 Employee Benefit Research Institute (EBRI) webinar (The Impact of Proposed Legislative Changes on Retirement Income Adequacy), EBRI Research Director Jack VanDerhei presented an analysis of pending legislative changes, including automatic contribution plans and arrangements (ACPAs), paired with a refundable saver’s credit.