Spencer Williams is president and CEO of Portability Services Network, a retirement industry-led utility dedicated to the industry-wide adoption of auto portability. He is also the founder, president and CEO of Retirement Clearinghouse, a specialized provider of retirement savings portability and account consolidation services for the mobile U.S. workforce. Recently, he sat down with Russ Alan Prince to discuss the impact that auto portability is having on Americans’ efforts to increase their retirement savings.
Russ Alan Prince: How does auto portability work?
Spencer Williams: Auto portability was developed by Retirement Clearinghouse as a technology solution that can seamlessly transfer an American worker’s 401(k) savings from one 401(k) plan to another when they change jobs. Technologically, the auto portability solution deploys “locate” queries and a “match” algorithm to find a plan participant’s inactive 401(k) account in a prior employer’s plan, determine that the inactive account and the participant’s active account in their current employer’s plan are owned by the same person, and then begin the process of automatically rolling the prior-employer plan account balance into the active account in the present employer’s plan.
It's important to note that auto portability was designed to facilitate the routine, standardized, and automatic transfer of small accounts with up to $7,000—the maximum allowed to be forced out of plans without participant consent under present regulations. Small, stranded accounts began to proliferate across the 401(k) system after the advent of automatic enrollment, and the regulatory green light for plans to incorporate it into their operations under the Pension Protection Act of 2006. Auto enrollment is a vital innovation for helping more Americans benefit from the U.S. retirement system, but it was rolled out at a time when our country’s workforce was becoming more mobile and when there was no seamless plan-to-plan portability for 401(k) savings.
The Employee Benefit Research Institute (EBRI) estimates that the average 401(k) plan participant will hold 9.9 jobs throughout their entire working life. Additional EBRI findings estimate that approximately 14.8 million Americans with retirement savings accounts change jobs each year, with more than 6 million of them holding under $7,000 at the time when they switch employers. Furthermore, research from plan recordkeepers, as well as Retirement
Clearinghouse indicates that over 54% of these accounts will end up being prematurely cashed out within a year of the job-change, and 75% of them will be cashed out within seven years.
According to EBRI, an estimated$92 billion in savings leaks out of the U.S. retirement system every year—primarily due to premature cash-outs of 401(k) accounts. We developed and introduced auto portability to make it much easier for Americans to forego cashing out or leaving behind their retirement dollars when they change jobs and to consolidate their hard-earned savings into their current employer-sponsored plans.
Prince: Are plan sponsors adopting auto portability?
Williams: Yes, they are! In the one year since the Portability Services Network—an industry utility which underpins a nationwide clearinghouse for small retirement accounts, where these account balances can be electronically moved from one plan to another—was established, more than 15,000 employer-sponsored plans across the country have signed up for auto portability. Those plans encompass approximately 5 million participants.
The sponsors that have signed their plans up for auto portability utilize the six inaugural recordkeeper members of the Portability Services Network, which are Alight, Empower, Fidelity Investments, Principal, TIAA and Vanguard.
Interest in auto portability only continues to increase. The Plan Sponsor Council of America’s “Plan Sponsor Policies on Cashouts, Missing Participants, and Uncashed Checks” report, published in October 2024, disclosed the results of the organization’s plan survey conducted the previous month. And according to the survey, 25.6% of plans—of all sizes—are thinking about implementing auto portability, including 30.4% of plans with 1,000 to 4,999 participants and 47.5% of plans with more than 5,000 participants!
Prince: If advisors and their clients are interested, how can they proceed to adopt auto portability?
Williams: If advisors and their business clients that sponsor 401(k) plans are interested in adopting auto portability, they can reach out to their plans’ recordkeepers and encourage them to join the Portability Services Network. Recordkeepers that wish to join the Portability Services Network can begin the process by sending an email to [email protected], and they can learn more about the Network and auto portability by visiting https://psn1.com/learning-center/about-psn/a-retirement-industry-led-utility.
In addition, advisors and the plan sponsors they represent can encourage plan participants to consolidate their 401(k) savings accounts as they change jobs throughout their working lives. Through their financial wellness programs for participants, they can provide educational resources about the importance of keeping retirement savings incubated in the system, how to obtain assistance with the 401(k) consolidation process and more.
Prince: What national impact can adopting auto portability have on Americans' retirement readiness?
Williams: Auto portability has the potential to help close not just our country’s retirement savings gap, but also the nation’s minority wealth gap.
According to our own research at Retirement Clearinghouse, if auto portability were to be adopted nationwide by plan sponsors and recordkeepers over a 40-year period, an estimated $1.6 trillion in extra savings would be preserved in the nation’s retirement system. That $1.6 trillion would include $744 billion in additional retirement income for 98 million minority Americans—and to break it down further, an extra $216 billion in retirement income for 30 million Black Americans.
Russ Alan Prince is a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.