Auto portability is a new automatic plan feature rapidly gaining acceptance by large defined-contribution recordkeepers. While the feature is relatively new, it’s tempting to view auto portability as an overnight success. In fact, auto portability has been a long time in the making, at least eight years.
There have been some important milestones along the way.
2014:
- Department of Labor Advisory Opinion Request Filed: For the automatic portability of defined contribution accounts less than $5,000.
- Initial Industry Working Group Meetings: Comprised of trade groups and large defined contribution recordkeepers.
- U.S. Senate HELP Committee Briefing: Auto portability concept and benefits provided in briefing to the U.S. Senate HELP Committee staff.
2015:
- Boston Research Technologies Study: Actionable Insights for Your Mobile Workforce
- Bicameral Congressional Letter to DOL: A bipartisan group of 11 members of Congress write to the Department of Labor, requesting guidance that would facilitate auto portability in order to reduce cashout leakage.
- RCH Meeting with DOL Sec. Tom Perez: RCH holds an initial meeting with Obama administration Labor Secretary Tom Perez.
2016:
- EBRI and RCH Testify to ERISA Advisory Council: EBRI and Retirement Clearinghouse join forces to advance the automation of plan-to-plan transfers (auto portability) before the ERISA Advisory Council.
- Auto Portability Simulation Introduced: RCH’s Spencer Williams and Dr. Ricki Ingalls introduce the first Auto Portability Simulation at the 2016 EBRI Policy Forum.
2017:
- Auto Portability Pilot Goes Live: RCH Auto Portability implemented at large plan sponsor, in pilot “consent” mode.
- DOL Guidance Framework Finalized: Initial framework for a DOL auto portability advisory opinion and a prohibited transaction exemption (PTE) is finalized.
- EBRI Identifies $2 Trillion of Auto Portability Benefits: EBRI presents Retirement Savings Projection Model (RSPM) data revealing $2 trillion in potential benefits for auto portability.
- Sen. Tim Scott, 10 Senators, 11 Trade Orgs Endorse Auto Portability: 10 U.S. Senators, led by Sen. Tim Scott, send letter to DOL Secretary Acosta. Letter is backed by 11 trade organizations who support auto portability.
2018:
- DOL Advisory Opinion 2018-01A: Clarifies the fiduciary duties with respect to the RCH Auto Portability program and established that RCH — not the plan sponsor — has fiduciary responsibility for the decision to transfer a safe harbor IRA balance to a new employer’s plan.
- Prohibited Transaction Exemption Proposed: An exemption is proposed for auto portability, to allow RCH to receive “transfer fees” while establishing participant protections.
- Common Contract Finalized: A common contractual framework is finalized to standardize and facilitate recordkeeper adoption of auto portability.
- EBRI Benefits for Demographic Segments: In EBRI Issue Brief #451, EBRI RSPM modeling reveals that auto portability dramatically improves the results of expanded access policy initiatives, reducing retirement shortfalls for ages 35-39 between 17% and 23%.
- Auto Portability Patent Approved: United States Patent US2013/0185224 A1: System and Method for Automated Consolidation of Individual Retirement Accounts.
- Widespread Media Coverage Begins: Prompted by favorable research, public policy support and regulatory action, widespread and persistent media coverage begins.
2019:
- DOL Transaction Exemption 2019-02: Provides an exemption to RCH for the receipt of “transfer fees” while also establishing important participant protections.
- Savings Preservation Working Group: Working group forms to thoroughly examine and document the problem of cashout leakage in our retirement system. Meta-analysis released October 2019.
- EBRI Auto Portability Issue Brief: EBRI Issue Brief #489 (The Impact of Auto Portability on Preserving Retirement Savings) provides definitive analysis of the cashout leakage as well as the magnitude of auto portability’s benefits for the nation’s defined contribution system.
2020:
- Alight signs, agrees to lead initial launch with plan sponsors: 7/14/20 Press Release
2021:
- Vanguard and Retirement Clearinghouse to Offer Auto Portability Service to 401(k) Participants
- Initial Launch with Plan Sponsors (Alight)
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