Pension Auto-Portability Seen as Key to Preventing Leakage

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By Sean Forbes

May 16 — Adding features such as auto-portability to retirement plans could be a way of preventing plan leakage and shield against workers not saving for retirement.

Plan leakage occurs most frequently when workers switch jobs and, rather than carrying their 401(k) balances with them to their new jobs, cash out of the plan.

At a policy forum May 13 held by the Employee Benefit Research Institute and Education and Research Fund, developers of a tool called the Auto Portability Simulation demonstrated just how much can be held in retirement plans during the next 30 years if plans have auto-portability features.

Auto-portability refers to plan assets automatically moving with workers as they switch jobs.

The APS, developed by Retirement Clearinghouse, shows that if plans used auto-portability for all plan participants with account balances of less than $5,000, over the next 30 years nearly $115 billion would stay in retirement plans.

Without such a feature, nearly $320 billion would be cashed out rather than being rolled over into a retirement plan.

If we're going to keep retirement plan assets in the system and encourage workers to save for retirement, we need both auto-portability and negative consent, Spencer Williams, chief executive officer of Retirement Clearinghouse, told Bloomberg BNA May 12.

Negative consent refers to situations in which plan participants failed to take steps to roll over their account balances to the plan sponsored by their new employer—in those situations, their consent wouldn't be required to roll the balance into the new employer's plan.

The problem is especially pronounced among members of the millennial generation, who in addition to having higher job mobility rates also tend to have less in their accounts and too often cash out their savings, Williams said.

Williams said his organization has requested an advisory opinion from the Labor Department on the issue of negative consent for auto-portability.

The DOL may be ready to release the opinion this summer, Williams said.

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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