The Saver's Match and Auto Portability: A Powerful Combination

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.

​​The Saver's Match: A Game-Changer for Low- and Middle-Income Savers
​The Saver's Match, enacted as part of the SECURE 2.0 Act of 2022, represents a significant improvement over its predecessor, the Saver's Credit. Starting in 2028, eligible individuals, based on their 2027 tax returns, can receive a federal matching contribution of up to 50% on the first $2,000 annual contributions to workplace retirement plans or IRAs, with a maximum match of $1,000 per tax year.

​​The potential impact of the Saver's Match program is substantial.

​​A recent analysis by Morningstar’s Model of U.S. Retirement Outcomes indicate that eligible workers could see mean increases of up to 12% in their retirement wealth, with single women (13.1%), Black Americans (14.6%) and Hispanic Americans (12.1%) benefitting disproportionately. This targeted approach addresses longstanding disparities in retirement savings and offers a powerful tool to boost financial security for underserved and under-saved populations.

​​Auto Portability: Preserving Small-Balance Retirement Savings
​While the Saver's Match addresses the challenge of incentivizing savings, auto portability tackles another critical issue: preserving retirement savings when workers change jobs.

​​The Portability Services Network is an industry-led utility launched in 2022 to facilitate the widespread adoption of auto portability and has already made significant strides. In its first year of operation, the network has more than 15,000 plans representing approximately 5 million participants signed up for auto portability.

​​Auto portability's technology automatically transfers small-balance accounts from a participant's former employer plan to their active account in a new employer's plan. This seamless process helps prevent cashout leakage and safe harbor IRA account abandonment, both of which have long-plagued the retirement system and have disproportionately affected the same demographic groups that the Saver's Match aims to help.

​​The Convergence of the Saver's Match and Auto Portability
​Combining the Saver's Match with auto portability presents a unique opportunity to amplify the benefits of both programs. Here's how auto portability, as delivered by the Portability Services Network, could add significant value to the Saver's Match program:

• Efficient Contribution Routing: Auto portability, delivered via PSN's network for transferring retirement savings between plans, could be readily adapted to handle the routing of Saver's Match contributions. This would ensure that federal matching funds are quickly and accurately deposited into participants' active retirement accounts.
• Reduced Administrative Burden: By leveraging auto portability’s technology, plan sponsors and recordkeepers could streamline the process of receiving and accepting Saver's Match contributions. This efficiency would minimize administrative costs and reduce the potential for errors.
• Enhanced Participant Engagement: The combination of auto portability technology and the Saver's Match could significantly boost participant engagement. Workers would see tangible benefits from both staying in the retirement system (through auto portability) and making contributions (through the Saver's Match), creating a powerful incentive for long-term savings behavior.
• Improved Data Accuracy: PSN’s robust data controls and participant matching capabilities could help ensure that Saver's Match contributions are correctly attributed to the active accounts of eligible participants. This accuracy is crucial for maintaining the integrity of the program and maximizing its impact.
• Seamless Job Transitions: For workers who change jobs frequently, PSN auto portability could ensure that their Saver's Match contributions follow them to their new employer's plan, maintaining the continuity of their retirement savings.
• Retirement Account Incubation: The combination of enhanced contributions from the Saver’s Match and the reduction of cash out leakage from PSN auto portability means participant balances will incubate, resulting in more participants avoiding the under $7,000 mandatory distribution, keeping long term retirement assets appropriately invested.
  
  

Overcoming Implementation Challenges
​While the potential benefits of integrating the Saver's Match with auto portability are significant, several challenges must be addressed:

• The Clock is Running: To meet the program’s 2027 tax year target date, substantial progress needs to be made on the design & implementation of the Saver’s Match program.
• Participant Education: A comprehensive education campaign will be necessary to help eligible savers understand how to maximize the benefits of the Saver's Match.
• Industry Cooperation: Success will depend on broad cooperation among plan sponsors, recordkeepers, and financial institutions to adopt and implement an integrated solution.
  
  

Looking Forward
​As we approach the 2027 tax year and the impending launch of the Saver's Match, now is the time for the retirement industry to begin preparing. By combining the power of the Saver's Match with the inherent efficiency of auto portability and the PSN network, we have a unique opportunity to create a more inclusive and effective retirement savings system.