Two Game-Changers: Auto Portability and PSN
Auto portability is the automatic movement of a terminated participant’s small balance account (under $5,000, increasing to $7,000 effective 12/31/23) from a former employer’s retirement plan to an active account at a new employer’s plan, when a participant changes jobs. It was conceived and developed by Retirement Clearinghouse (RCH) to curb the unprecedented levels of cash out leakage occurring as participants change jobs and was designed to work within the existing infrastructure and data flows of the qualified employer plan system. It’s now a proven technology, working since 2017 to facilitate thousands of automatic transfers for a mega plan sponsor in the healthcare industry.
Auto portability is a game-changer for under-served and under-saved participants – particularly for minorities, women, lower-income and younger participants – as these demographic segments stand to benefit the most from having their retirement savings automatically moved forward, following a change of jobs.
That’s why auto portability has been backed by a broad coalition of supporters, including bicameral/bipartisan legislators, regulators, large employers and retirement industry trade organizations. Finally, in November 2021, auto portability received unequivocal endorsements from the NAACP and from the National Urban League, who recognized its beneficial impact on addressing the inequities and economic challenges experienced by Black Americans and by other communities of color.
Importantly, plans also derive tremendous benefits from auto portability by reducing the problems associated with a proliferation of small accounts (increased plan expenses, missing participants, uncashed distribution checks and increased audit risks).
Ultimately you, the plan sponsor must make the decision on adopting auto portability for your plan. If you do, we believe that you’ll not only be acting in the best interests of your participants and their retirement security, you’ll be acting in the best interests of your plan, while playing an important role in bolstering retirement security for millions of Americans.
We encourage you to use this website (including the Learning Center), to understand more about auto portability and the PSN.