Over the past 15 years, a very large (250,000+ participants) 401(k) plan sponsor that our company has had the opportunity to serve has been highly successful in delivering improved participant outcomes by incrementally adopting a full program of retirement savings portability.

Were the plan’s experience set to music, it could be described as “401(k) Portability in Four Movements” – opening with discordant levels of cashout leakage but quickly building towards more satisfying participant outcomes, including substantial improvements in the preservation and consolidation of retirement savings.

America’s 401(k) system, long plagued by friction, produces $92.4 billion of excessive cash-out leakage annually.   In recent years and culminating in 2021, the private sector has finally “cracked the code” and is delivering innovative fintech solutions, combined with education and personal assistance to reduce friction and to enable true 401(k) portability.

When research performed 8 years ago reveals that your 401(k) plan, by turning on portability and consolidation for all participants, has halved cashout leakage and dramatically reduced its small account problem, what do you do for an encore?

401(k) Plan Sponsors: How would you like to radically boost your participants’ financial wellness, increase your plan’s assets, reduce your plan’s costs, and prevent missing participants?

Adopting this one simple and proven trick – retirement savings portability – delivers all this and more!

The problem of missing participants in employer-sponsored retirement plans is one of the most important, yet perplexing issues facing plan sponsors, and for good reason.

Ensuring that participants (or their beneficiaries) receive their benefits is the essence of an employer’s fiduciary responsibility – and missing or unresponsive participants who become separated from those benefits can generate significant risks for plan fiduciaries.

I often write about the phenomenon of cashout leakage, which occurs when participants change jobs and prematurely withdraw their retirement savings, prior to normal retirement age.

In a press release issued Tuesday, July 14th, Retirement Clearinghouse (RCH) announced that Alight Solutions will lead the nationwide launch of the RCH Auto Portability program. 

America is a fundamentally caring country, as reflected in the collective actions of its individuals, businesses and policymakers. In the midst of the COVID-19 crisis, no policy reflects this caring spirit more than the aptly-named CARES Act, which, among other things, temporarily allows retirement savers hard-hit by the COVID-19 crisis to tap their qualified retirement savings while avoiding the punitive, 10% early-withdrawal penalty.

Looking for a quick primer on how auto portability works? Watch the video below, which walks you through the four-step process, including:

1. Worker changes jobs
2. Locate new worker's account
3. Match data
4. Savings follow worker

In this series, I identify five key reasons why an auto portability program serves the best interests of plan participants.

Previously:   In Part 1, I examined the dramatically improved participant outcomes that will result from a program of auto portability.  In Part 2, I described how auto portability, by enhancing and extending automatic rollover programs, represents an enhanced standard of participant care.  In Part 3, I presented evidence that the adoption of auto portability could lead to a reduction in plan expenses.  In Part 4, I addressed how auto portability could enhance 401(k) participants’ financial wellness.

In part 5, my final installment of the series, I explain how auto portability can mitigate retirement-related cybersecurity risks.