The consortium of retirement plan service providers focused on making it easier for Americans to transfer their workplace retirement accounts when changing employers has officially launched.
Becoming operational 12 months after being announced in 2022, the Portability Services Network (PSN) on Nov. 7 announced the launch of its digital auto portability solution, which is intended to help tens of millions of under-served and under-saved Americans keep their retirement savings invested.
PSN includes as founding members the nation's leading workplace retirement plan recordkeepers—Alight Solutions, Empower, Fidelity Investments, Principal, TIAA, and Vanguard—under the leadership of Robert L. Johnson, Chairman of the PSN and Retirement Clearinghouse (RCH), who recently participated in a D.C. Pension Geeks Podcast with American Retirement Association CEO Brian Graff.
"The Portability Services Network is poised to deliver on its core mission to stem the cash-out crisis that harms Black and other under-served and under-saved low-wage workers," Johnson said in a statement. “PSN, through its innovative business model, will serve more than 60% of all workers seeking to maintain their 401(k) accounts in the retirement system throughout their working lives."
Johnson adds that, in working with the nation's employers, PSN's network of plan providers has the potential of helping American workers retain more than $1.5 trillion in retirement savings that is currently leaking out of the system when they change jobs, including $619 billion in retirement savings for low-wage Black and other minority workers over the coming generation.
“So far, we have seen great interest from employers—and we encourage all plan sponsors to learn about how this solution can help their employees greatly improve their retirement security," Johnson further stated.
PSN is an independent, industry-led utility which utilizes RCH’s technology to build a nationwide, digital hub connecting workplace retirement plan recordkeepers and the plan sponsors they serve that elect the auto portability service.
It is the culmination of more than a decade of collaboration between the private and public sectors. For PSN member recordkeepers and the plans that have elected the auto portability solution, PSN acts as a clearinghouse for automatically locating a participant's active 401(k), 401(a), 403(b) or 457 account in their current employer's plan and transferring the same participant's account under $7,000 as of Dec. 31, 2023, from their prior employer's plan into their active account.
As alluded to previously, the automation of this process will help reduce the leakage of assets from the U.S. retirement system stemming from premature cash-outs and preserve trillions of dollars in savings, which is particularly beneficial for communities of color, women, and low-income workers, the announcement notes.
The effort was also recently given a boost following enactment of the SECURE 2.0 Act, which included a number of provisions that seek to help preserve retirement savings, including the codification of a safe harbor exemption permitting a retirement plan service provider (i.e., RCH) to provide employer plans with auto portability services.
PSN’s Board members encourage other recordkeepers to join, contending that growth of the network will only help to strengthen its ability to minimize cash-out leakage and improve retirement outcomes. Recordkeepers that own or participate in PSN will not receive any compensation for facilitating auto portability transactions from participants, the announcement further advises.
For more information, visit https://psn1.com/.
