TIAA has joined Retirement Clearinghouse, LLC (RCH) alongside Empower, Fidelity, Vanguard and Alight linking up with the Portability Services Network, LLC (PSN). The network was created to help workers automatically move smaller retirement savings in 401(k), 401(a), 403(b), and 457 accounts to their new employers’ plans as they change jobs—in essence making rollover, rather than cash-out the “default” when changing employers.
According to a press release, the need for auto portability has been driven by the lack of seamless plan-to-plan savings portability amid a highly mobile workforce. Approximately $92 billion in savings leaves the U.S. retirement system every year because Americans who switch jobs prematurely cash out their workplace retirement accounts and pay taxes and penalties on those cash-outs, according to Employee Benefit Research Institute (EBRI) data cited by RCH.
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 other job-changing workers. Within this cohort, cash-out rates for job-changing minorities, low-income workers, and women are also higher than average.
The recently enacted SECURE 2.0 Act of 2022 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.
