Auto Portability Gaining Acceptance

401k Plan AutoAuto portability appears to be gaining some ground as a solution for retirement plans.  Auto portability can impact cash-out leakage, missing participants, and forgotten 401(k) accounts.  The best part?  Retirement plan participants value auto portability, making it a win-win for both employers and workers. 

Auto portability is a relatively new 401(k) plan feature that automatically transfers small-balance retirement plan accounts when participants change jobs.  Plan participants enthusiastically endorse the idea.  85.3% of those surveyed by the Employee Benefits Research Institute (EBRI) in its 31st Annual Retirement Confidence Survey (RCS) said they’d find value in having an auto portability feature in their employer’s retirement plan.  

It’s no wonder: Rolling a 401(k) account over from a previous employer is generally between a pain-in-the backside and a hassle.  Moreover, participants who terminate from the plan sponsor company bring additional challenges.  They can potentially go missing from employers’ records due to a move or other reasons.  In addition, an increasingly mobile workforce has created challenges for participants and plan sponsors.  As workers change jobs they frequently leave retirement plan balances behind and these participants often ignore or forget about these retirement plan accounts with former employers.  Auto portability can help mitigate these issues, preserving retirement savings and improving financial wellness across the board. 

Auto portability also helps facilitate retirement account consolidation, which has larger implications to help improve retirement plan cybersecurity.  According to a recent 401kspecialist article, auto portability “…reduces the cybersecurity ‘attack surface’ for participants, plan sponsors, and service providers, and minimizes opportunities for fraudulent behavior.”  In other words, less accounts means fewer opportunities for cyber criminals to hack in.  This can help to preserve and protect retirement savings from theft and fraud. 

For all of these reasons, the case for auto portability is compelling, and getting stronger.  Secure Act 2.0, retirement plan legislation still pending in Congress as a follow-on to 2019’s landmark SECURE Act, proposes a nationwide retirement plan account “lost and found”.  This would be a federal registry of retirement savings accounts held by terminated employees.  The hope is to re-unite Americans with lost or forgotten retirement savings.  Including auto portability in public policy could help to improve the results, some experts believe. 

Plan sponsors challenged by left-behind small-balance retirement plan accounts should consider implementing auto portability.  However, it may possibly already be a feature in your plan.  It is one more way to help eliminate some of the headaches and expenses associated with administering and recordkeeping retirement plan accounts on behalf of former participants.  Auto portability also helps you fulfill your fiduciary responsibility.  It does so by providing an easy opportunity for participants to reclaim forgotten account balances, consolidate accounts, and boost their chances for financial security in retirement.


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