An interesting and valuable finding is buried in EBRI’s 2022 Retirement Confidence Survey (RCS), but you won’t find it referenced in the organization’s initial report, officially released to the public in late April.
In an excerpt of a report available to survey partners, the RCS found that a plurality of job-changing 401k plan participants favored automatic plan-to-plan portability over consolidating their savings to an IRA or leaving their savings behind in their former employer’s plan. This result comes on the heels of EBRI’s 2021 survey, which found that nearly nine in 10 participants believed that auto portability would be valuable to them.
Now, it can be definitively stated that 401k participants not only need plan-to-plan portability—to stem cashout leakage, to save time & money, and position them for the transition to retirement income—they want considerably more plan-to-plan portability as well. Hopefully, that preference will be recognized by regulatory authorities, such as the Department of Labor, as they pursue their stated priority of encouraging broader plan-to-plan portability.
EBRI’s Retirement Confidence Survey is the longest-running survey of its kind and is conducted annually by EBRI and the independent research firm Greenwald Research. According to EBRI, the RCS gauges the views and attitudes of working-age and retired Americans regarding retirement, their preparations for retirement, their confidence with various aspects of retirement and related issues.
In 2021, EBRI expanded the RCS to focus on diversity, specifically examining the retirement security of Black and Hispanic workers and retirees. In 2022, the EBRI RCS turned its demographic focus to the LGBTQ+ community, oversampling for this population segment.
The ‘buried treasure’ in the 2022 survey
In the new RCS, survey respondents who were offered a workplace retirement plan were asked “If/when you change jobs, would you prefer that your retirement plan savings with a previous employer”:
- Be automatically transferred to your current employer’s plan?
- Be automatically transferred to an existing IRA?
- Remain in your previous employer’s plan?
Overall, almost 72% of the respondents preferred that their retirement savings be automatically consolidated into an existing retirement savings account, against only 28% who preferred that their savings remain in their previous employer’s plan.
Within the 72% of respondents who preferred automatic consolidation, 56.2% preferred consolidation into their current employer’s plan, vs. 43.8% preferring consolidation into an existing IRA.
Why the finding is valuable
Understanding what 401k participants need and what they want is vital to effecting change.
It’s easy to make a needs-based case for increased 401k plan-to-plan portability. Our present 401k system is laden with systemic friction, which accounts for roughly two-thirds of all cashouts. Seamless plan-to-plan portability would not only help participants avoid cashout leakage, but it would also save participants time and money in managing their retirement savings, and position them for the transition to retirement income.
Unfortunately, to the extent that portability occurs, it comes in one flavor: rollovers to IRAs, which currently outpace plan-to-plan transfers by a factor of at least 10 to one.
Now, with the findings from both the 2021 and 2022 Retirement Confidence Surveys, it’s abundantly clear that participants want more plan-to-plan portability and even prefer it to the alternatives.
The secret is out
While EBRI didn’t showcase this finding in their initial RCS report, I’m hoping they’ll feature it when more detailed demographic breakdowns are made available in May. In the meantime, the secret is out, and hopefully others – including the Department of Labor—could find 401k participants’ strong preference for plan-to-plan portability compelling.
See Also:
- Why the Case for 401(k) Auto Portability Just Got Stronger
- The Power of 401K Auto Portability: A Case Study
- The New Age of 401k Plan Portability
Tom Hawkins is Senior Vice President, Marketing and Research with Retirement Clearinghouse. He oversees all critical operational aspects of this area, including RCH’s web presence, digital marketing, and plan sponsor proposals. In other roles for RCH, Hawkins has performed product development, helped lead the company’s re-branding, evaluated and organized industry data, and makes significant contributions to RCH thought leadership positions.
