After making great strides following the Pension Protection Act of 2006 (PPA), adoption of auto enrollment has continued to build slowly but steadily in recent years. According to DOL Form 5500 data, by 2021 the feature has been adopted by plan sponsors housing almost 50% of total 401(k) participant accounts.

The passage of the Securing a Strong Retirement Act of 2022 (known as “SECURE 2.0”) reinforces the bipartisan commitment in Congress to helping Americans save more for retirement. Signed into law as part of a $1.7 trillion omnibus spending bill signed by President Biden on December 29, the legislation includes a variety of provisions, including the expansion of automatic enrollment in 401(k) and 403(b) plans. Fortuitously, SECURE 2.0 measures related to auto portability come shortly after the launch of an industry initiative to make auto portability—a technology solution that can operate in tandem with auto enrollment to optimize plan participants’ retirement outcomes—much more accessible to plan sponsors across the country.

The observance of National 401(k) Day on Friday, September 9^th is an opportunity to reflect on the long-running, highly successful public-private collaboration that has fostered the rapid ascendance of America’s 401(k) system.

It’s my belief that this partnership will continue to drive innovations that will expand and improve the 401(k) system for millions of Americans – not only helping them to save more but preserving more of their savings for retirement.

An interesting and valuable finding lies buried within EBRI’s 2022 Retirement Confidence Survey (RCS), but you won’t find it referenced in the organization’s initial report, officially released to the public on Thursday, April 28^th.

In an excerpt of a report available to survey partners, the RCS found that a plurality of job-changing 401(k) plan participants favored automatic plan-to-plan portability over consolidating their savings to an IRA, or leaving their savings behind in their former employer’s plan. This result comes on the heels of EBRI’s 2021 survey, which found that nearly 9 in 10 participants believed that auto portability would be valuable to them.

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.

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. 

During testimony in a July 28^th hearing held by the Senate Finance Committee (Building on Bipartisan Retirement Legislation: How Can Congress Help?), Aliya Robinson, Senior Vice President of Retirement and Compensation Policy for the ERISA Advisory Committee (ERIC), twice voiced her support for auto portability, the new plan feature that automatically moves small balances to the new employer’s plan when participants change jobs.

Arriving with little fanfare, a recent study prepared by the Staff of the Joint Committee on Taxation, a nonpartisan committee of the United States Congress, confirms the findings of earlier research on cashout leakage – namely, that cashout leakage is a big problem, is driven by job changing, and is exacerbated by "forced distributions and [a lack of] portability of plans.”

French author and poet Victor Hugo observed: “nothing is more powerful than an idea whose time has come.”

In theory at least, plan-to-plan portability has always been a feature of our 401(k) system. In practice, it’s been completely impractical for all but a hardy few. The idea of automating 401(k) portability was the holy grail, a ‘moonshot’ generally believed to be impossible…until now.

During the COVID-19 crisis, massive job losses combined with economic hardship and relaxed restrictions on withdrawals have created the conditions for a perfect storm of 401(k) cashout leakage. Unfortunately, this storm may soon gain more strength, when a surge in end-of-year 401(k) plan terminations could trigger a new flood of cashouts, as participants are forced to leave their former employers’ plans.