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RCH, RK Trio Launches Portability Consortium

Client Services

Fidelity Investments, Vanguard, and Alight Solutions announce that they have collaborated with Retirement Clearinghouse, LLC to create a consortium of workplace retirement plan recordkeepers to accelerate the nationwide adoption of auto portability.

The consortium, branded “Portability Services Network, LLC, is set to launch in 2023 and will utilize Retirement Clearinghouse's auto portability solution to build a nationwide digital hub connecting workplace retirement plan recordkeepers and the plan sponsors they serve. According to a press release, PSN will act as a clearinghouse for automatically locating a participant's active workplace retirement account in their current employer's plan and transferring the same participant's account from their prior employer's plan into their active account. The consortium currently represents approximately 43.8 million workers across more than 48,000 employer-sponsored retirement plans. Vanguard and Alight had each previously announced linkages with the RCH platform.

Auto Portability is “the routine, standardized and automated movement of an inactive participant’s retirement account from a former employer’s retirement plan to their active account in a new employer’s plan.” It is intended to serve the needs of participants who are subject to the mandatory distribution/force-out provision of their employer-sponsored plan (i.e., accounts with less than the current limit of $5,000), and is designed to work within the existing infrastructure and data flows of the qualified employer plan system. Said another way, it attempts to make the rollover of a participant’s balance the default, rather than a cashout, which winds up being the default for many, particularly smaller balance participants. Legislation that would support the concept was introduced last June in the U.S. Senate, and those provisions remain in the EARN Act, currently under deliberation.

Automating the process of moving 401(k), 401(a), 403(b), and 457 account balances from plan to plan when workers change jobs will help mitigate cash-out leakage and preserve trillions of dollars in savings in the U.S. retirement system, particularly benefiting minorities, women and low-income workers. Approximately $92 billion in savings leaves the U.S. retirement system every year because Americans who switch jobs prematurely cash out their 401(k) savings accounts and pay taxes and penalties on those cash-outs, according to the Employee Benefit Research Institute (EBRI). Workers with less than $5,000-the focus of the auto portability service-cash out at the time of their job change at much higher rates than all job-changing workers.

"I am delighted to see the leaders in the retirement services industry come together to accelerate nationwide adoption of Retirement Clearinghouse's auto portability solution as part of our vision for helping under-served and under-saved Americans achieve financial security," said Robert L. Johnson, Founder and Chairman of The RLJ Companies and Chairman of Retirement Clearinghouse. "This is truly a historic moment for the industry, as well as our country."

In addition to Alight, Vanguard and Fidelity, the Portability Services Network will be majority owned by RCH with Robert L. Johnson, Founder and Chairman of The RLJ Companies and Chairman of Retirement Clearinghouse as its chairman. It’s designed to include up to three additional major recordkeepers as owners. PSN's owners will govern the network as an industry utility designed with the goal of operating at the lowest cost to workers participating in auto portability. PSN is open to all recordkeepers to connect.

According to the press release, the recordkeepers that own or participate in PSN will not receive any compensation for facilitating auto portability transactions from participants. For more information, please visit  or email [email protected].