Anyone of sufficient age who exercises regularly knows that gains become harder as you grow older. While improvements are possible, increased effort doesn’t always work. Instead, older fitness aficionados dial in the quality and efficiency of their workouts to experience continued gains.

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.

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.

I’m convinced that Auto IRA programs, despite their potential size and strength, suffer from an obvious Achilles’ heel: a lack of retirement savings portability.  

Without addressing their portability problem, Auto IRA programs could expand, but may never reach their full potential, housing large numbers of churning, small-balance accounts. However, with adequate support for portability both into and out of these programs, they could dramatically increase the odds that they deliver on their promise of building incremental retirement wealth for millions of Americans.

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.

Based on solid research, we’ve long known that typical automatic rollover IRAs result in high levels of cashout leakage. We’ve also suspected that they’ve contributed to an explosion of small-balance IRAs.
 

Although the financial wellness of employees has emerged as a top priority for employers in recent years, too many workers are still struggling to improve their financial health.

Much has been written in the media, including this column, about the increase in mobility of today’s American workforce.

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.