Portability Services Network Expands Impact
According to a recent release, the Portability Services Network (PSN), which began with three of the biggest recordkeepers in the country just over a year ago, has now grown to include three additional providers, covering over 15,000 retirement plans and 5 million members.
For employees with balances under $7,000, PSN, led by Robert L. Johnson's Retirement Clearinghouse LLC, allows the automated transfer of retirement funds. The savings from an employee's prior workplace defined contribution plan or safe harbor IRA are automatically moved to their new plan if they change jobs and their new employer's plan is included in the network.
The goal of this approach is to decrease the number of cash-outs and keep investors from losing sight of their retirement assets. According to Retirement Clearinghouse research, auto-portability for all plans and recordkeepers could save the retirement system $1.6 trillion over the course of 40 years.
The PSN currently has Alight, Vanguard, and Fidelity Investments as active recordkeepers. While TIAA and Principal Financial Group are scheduled to go live later in 2025, Empower is scheduled to join in January 2025. More plan sponsors are being aggressively encouraged to join by the network.
In a statement, Johnson, chairman of Retirement Clearinghouse and PSN, stated, "Auto-portability was conceived as an innovation to benefit minority and women savers, and it is immensely gratifying to witness its coming to fruition."
PSN has finished 549 auto-portability transactions as of December 1st, while 7,841 more are still pending. After a match is confirmed, the auto-portability process takes roughly 60 days, and participants usually become eligible for required dividends 30 to 90 days after being terminated from their jobs.
By linking users' active accounts with other tax-advantaged accounts with less than $7,000 and transferring the funds to the active account, the network serves as a clearinghouse. Although they profit from keeping assets on their platforms, PSN recordkeepers do not charge participants for enabling these transactions.
The Investment Company Institute reports that as of June 30, 2024, $11.3 trillion was held in U.S. defined contribution plans. The PSN is a big step in simplifying retirement savings management and protecting members' financial futures.
Note: It is prudent to note that though the PSN has great potential for the retirement plan industry, it does pose additional fiduciary responsibilities. Joining the PSN puts additional notice requirements on employers. Further, plan sponsors must appoint a plan official as a fiduciary responsible for monitoring transfers into the plan and confirming that amounts received are invested properly. We are still awaiting additional guidance from the DOL regarding any safe harbors around the PSN.
Source: https://www.plansponsor.com/workplace-plan-portability-network-supports-5m-participants/
Please contact your MCF Advisors Plan Consultant with any questions or to review your current plan and plan’s offerings.
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