Another major recordkeeper has joined the Portability Services Network, LLC (PSN).
Today, Principal Financial Group announced it has joined the consortium of retirement plan service providers focused on helping America’s under-served and under-saved workers improve their retirement outcomes by making it easier to transfer their workplace retirement accounts when changing employers.
With the move, Principal becomes a board member and one of seven owning members of PSN, which utilizes the auto-portability solution created by Retirement Clearinghouse, LLC (RCH). Fidelity Investments, Vanguard and Alight Solutions established the industry-first consortium last October along with RCH. Empower joined in February and TIAA in April.
“As a retirement leader, it’s our responsibility and commitment to help create the best possible retirement outcomes for America’s workers, including making it easy for their retirement savings to move with them,” said Teresa Hassara, senior vice president for Retirement and Income Solutions at Principal. “Being a part of the Portability Services Network adds another tool to the toolbox we have at Principal to support individuals on their paths to achieving financial security.”
According to RCH, employees changing jobs more frequently and a limited ability to match participant accounts across plan provider systems have increased the need for auto-portability—defined as automatically transferring an employee’s retirement savings from their prior employer’s plan to their new employer’s plan. Approximately $92 billion in savings is prematurely cashed out of workplace retirement accounts every year (according to Employee Benefit Research Institute (EBRI) data), leading to additional tax implications and early withdrawal penalties for workers. This disproportionately impacts those with lower retirement account balances—typically less than $5,000.
PSN assists workers with lower balances who change employers by automatically matching and moving their workplace retirement savings to their new retirement plans. Its goal is to establish a nationwide, digital hub connecting workplace retirement plan recordkeepers and the employers they serve. The automation process will help workers avoid unnecessary complications as they move assets into 401(k), 401(a), 403(b), and 457 accounts, which could mitigate early plan cash-outs and enable financial security for more American workers.
“We are excited to have Principal join the consortium of recordkeepers that are working together with Portability Services Network to improve workers’ retirement security. The company’s leadership, action, and progress to increase financial access and inclusion will help more people benefit from auto-portability—in particular people of color, lower-income workers, and women, who have higher than average cash-out rates,” said Robert L. Johnson, chairman of The RLJ Companies and chairman of Portability Services Network and Retirement Clearinghouse.
The consortium currently represents approximately 82 million workers across more than 185,000 employer-sponsored retirement plans. As the latest owning member to join PSN, Principal adds approximately 11 million retirement plan participants and more than 46,000 plans to the coalition.
The new service is expected to go live for participants in plans with administrative services provided by Principal in early 2025.
SEE ALSO:
• The 401(k) ‘House-Cleaning’ to Come
• Auto Portability Consortium Adds Empower
• The Big Shift Towards Auto Portability
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
