--- title: The Top Five Misconceptions About Auto Portability description: Significant misconceptions persist about auto portability. Here are the top five. image: https://blog.rch1.com/hubfs/Misconceptions.png --- [![Retirement Clearinghouse Logo](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/logo.png?width=1000&height=648&name=logo.png "Retirement Clearinghouse Logo")](https://rch1.com/) [Privacy Policy](https://securities.rch1.com/common/PrivacyStatement.pdf) [Sponsors/Service Providers](https://rch1.com/plan-sponsors) [Individuals](https://rch1.com/individuals) [Login](https://rch1.com/#) - [Home](https://rch1.com/home-page) - [Individuals](https://rch1.com/individuals) - [Individuals Home](https://rch1.com/individuals/individuals-home) - [Who is RCH?](https://rch1.com/individuals/who-is-rch) - [Why Does RCH Have My Retirement Savings?](https://rch1.com/individuals/why-does-rch-have-my-retirement-funds) - [Manage Your RCH IRA Account](https://rch1.com/individuals/manage-your-rch-ira-account) - [Cash Out Calculator](https://rch1.com/individuals/cash-out-calculator) - [Moving Your Retirement Savings Forward](https://rch1.com/individuals/moving-your-retirement-savings-forward) - 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[Consolidation Corner Channel](https://rch1.com/consolidation-corner-channel) - [Events](https://rch1.com/events) - [Auto Portability](https://rch1.com/auto-portability) # The Top Five Misconceptions About Auto Portability #### [By Thomas Hawkins](https://blog.rch1.com/blog/author/thomas-hawkins) | September 29, 2021 ![Misconceptions](https://blog.rch1.com/hs-fs/hubfs/Misconceptions.png?width=200&name=Misconceptions.png)Auto portability is a new “automatic” plan feature that is rapidly gaining acceptance by [large defined contribution recordkeepers](https://rch1.com/auto-portability/regulatory-information/participating-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)](https://rch1.com/auto-portability/regulatory-information/enabling-regulation). Despite this, significant misconceptions persist about auto portability. Here are the top five:   **1. Only terminated participants with small balances will benefit from auto portability.** Terminated participants are only half of the auto portability story, as one plan’s terminated participant soon becomes another plan’s new hire. - New plan participants will enjoy the benefits of increased retirement savings consolidation, which helps them avoid cashouts, saves them time & money and greatly simplifies their retirement planning. - Over time, plans will see as many automatic roll-ins for their new hires as terminated participants whose balances leave the plan. - Plans will benefit from lower numbers of terminated small balance account, as well as significantly higher average balances, which both serve to lower average plan costs, as well as a decreased incidence of missing participants and uncashed checks. **2. Everyone must adopt auto portability before it can work.** During auto portability’s initial adoption phase and beyond, end-to-end auto portability will easily coexist with safe harbor IRAs originating from [automatic rollovers](https://rch1.com/automatic-rollovers) from non-adopting plan sponsors, providing easy portability for a diverse group of plans and participants. Known as “[authorized portability](https://blog.rch1.com/blog/so-happy-together-auto-portability-and-authorized-portability)” – consent-based portability works when: - A locate-and-match algorithm links a non-auto portability safe harbor IRA to a new account with a plan that’s adopted auto portability. - The located & matched participant is notified and provides their consent via web, IVR or call center. - An automated roll-in follows, along with confirmation to the participant. [Research indicates](https://info.rch1.com/ongoing-retirement-savings-portability-assessment) that a consent-based framework delivers high levels of participant location, matching and affirmative consent – resulting in fully automated roll-ins. **3. Participant protections are not sufficient under auto portability.** On the contrary, auto portability’s participant protections represent an enhanced standard of care for participants subject to mandatory distributions. The DOL’s Advisory Opinion 2018-01A establishes a protective framework that addresses: - Participant searches - Transparency of fees - Required notifications - Program reporting Finally, the technical architecture of auto portability ensures that participant data is securely transferred, and its result – consolidation – serves to [lower overall cybersecurity risks](https://blog.rch1.com/blog/cybersecurity-is-augmented-by-auto-portability). When compared against other safe harbor IRA practices, participant protections are dramatically enhanced by auto portability. **4. Auto portability is complex for plan sponsors to evaluate, adopt and administer** Not at all. - Consistent with the selection of any automatic rollover IRA provider, a plan’s fiduciary performs one-time due diligence and signs a services agreement. - Plan documents may require amending, including allowing plan roll-ins, authorizing automatic rollovers for all balances below $1,000 and disclosing auto portability program fees. **5. Auto portability is expensive for participants.** At most, participants pay a modest consolidation fee ($59) and in some cases, a monthly account maintenance fee, making auto portability considerably less “expensive” than the alternatives of cashing out or performing a “do-it-yourself” (DIY) roll-in. For example, a 30-year-old: - Cashing out $1,679 will net only $1,175, after paying taxes and penalties - Expects to spend anywhere from 5 to 19+ hours attempting to perform a DIY roll-in - Avoiding a cashout via auto portability will have $17,926 at retirement That’s why the [2021 EBRI Retirement Confidence Survey found that nearly 9 in 10 plan participants](https://rch1.com/blog/the-case-for-auto-portability-gets-stronger) surveyed thought that an auto portability feature would be valuable. 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