Consolidation Corner

“America’s retirement system is sustainable” said no one, ever.

That’s the basis for my somewhat cynical reaction to a February 14^th, 2022, Request for Information (RFI) issued by the DOL’s Employee Benefits Security Administration (EBSA). The RFI (Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk) was issued pursuant to a May 20th, 2021 Executive Order, and asks respondents to identify climate change related threats to “the life savings and pensions of U.S. workers and families.”

I’m old enough to remember a time when auto portability was a concept, scarcely worthy of serious attention by practically anyone except a few zealots with an idea.

For years, regulators, policymakers and, of course, 401(k) plan sponsors have struggled with the vexing problems of missing participants, uncashed distribution checks and small, forgotten accounts. Every year, sponsors beseech regulators for clear guidance to mitigate their fiduciary risk, while lawmakers propose policies such as lost and found registries to help deal with the problems. Yet, the problems persist and have grown worse over time, even accelerating recently due to The Great Resignation.

COVID-19 has altered so much in our nation, and our world, over the past two years. Many of us learned to stop and smell the roses during lockdowns, and count our blessings, especially health and family. For those who were fortunate enough to remain employed full-time during the pandemic and could work remotely, videoconferencing tools like Zoom and Microsoft Teams suddenly became indispensable for conferring with colleagues and customers.

Robert L. Johnson, Founder and Chairman of The RLJ Companies and Chairman of the Board and largest shareholder of Retirement Clearinghouse (RCH), has secured endorsements for auto portability from two premier civil rights organizations – the National Urban League, and the National Association for the Advancement of Colored People (NAACP) – both with over a century of experience advocating for solutions that address the inequities and economic challenges experienced by Black Americans and by other communities of color.

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.