Changing jobs can put retirement savings at risk, particularly for workers with small 401(k) balances. While automatic portability programs are helping reduce cash-outs, new research suggests that savings may still lose value while waiting to be transferred to a new employer’s plan—if they get transferred at all.
As reported in a recent InvestmentNews article, separate studies from Vanguard and PensionBee highlight both the promise and limitations of efforts to preserve retirement savings when employees change jobs.
Vanguard examined 83 retirement plans participating in the Portability Services Network (PSN), an industry initiative designed to automatically transfer eligible small 401(k) balances into workers’ new employer plans.
The findings suggest the program is reducing retirement savings leakage. Among departing employees with balances below $1,000, cash-out rates fell from approximately 50% to 9% after their plans joined the network. For participants with balances between $1,000 and $7,000, the decline was more modest, from 39% to 31%.
But getting those savings into a new employer’s plan remains a challenge.
Of approximately 220,000 participants whose balances Vanguard has transferred through the network, only 6% have been matched with a new employer plan. The remaining 94% are still in interim safe harbor IRAs, where fees and conservative investment defaults can gradually erode their savings.
Portability Services Network participation remains limited, with only about 3% of U.S. 401(k) plans participating as of early 2026. That makes it difficult to match workers with their new plans and complete the transfer process.
Separate research from PensionBee, based on data from the Employee Benefit Research Institute (EBRI), illustrates the potential consequences of leaving small balances in automatic rollover IRAs.
Among the findings:
- 68% of automatic rollover IRAs had lost value after one year.
- 87% remained open after one year, while 52% were still open after eight years.
- Nearly 40% of accounts that remained open for eight years had lost value.
- Smaller accounts were particularly vulnerable. Among accounts starting at $1,200 or less, 47.1% had lost value after eight years.
Flat account fees and low-yielding, cash-heavy investments contribute to the problem. EBRI estimates that 76% of these assets sit in cash-like investments, which PensionBee says typically earn 0.5% to 2%. For example, an account with a $100 opening fee and a $5 monthly charge would incur $160 in fees during its first year, equivalent to more than 13% of a $1,200 balance.
The findings also point to a participant education gap. Earlier PensionBee research found that only 35% of workers with a 401(k) left behind at a former employer knew their savings could be transferred without their consent.
For plan sponsors, fiduciaries, and advisors, the research highlights opportunities to improve how small balances are handled when employees leave. Reviewing automatic rollover providers, associated fees, and default investments, along with helping departing employees understand their options, could reduce the risk of savings erosion.
Broader adoption of auto portability could also help more balances reach their intended destination, helping participants preserve the retirement savings they’ve worked so hard to accumulate, regardless of their account balance.
