Nearly 21,000 Plan Sponsors Have Adopted PSN Auto-Portability

The Portability Services Network LLC reported to PLANSPONSOR that 20,997 plan sponsors have elected to adopt automatic portability, as of September 30. The number reflects a 1,225-plan (6.2%) increase from the 19,772 plans reported as of June 30.

Portability Services Network is a clearinghouse that facilitates the automatic transfer of small 401(k) balances among the six recordkeepers that own the network: Alight Solutions, Fidelity Investments, Empower Retirement, TIAA, Principal Financial Group and Vanguard. The network, which went live in November 2023, uses its technology to automatically locate a participant’s retirement account in their former employer’s plan and transfer balances less than $7,000 into an active account, as permitted by a provision in the SECURE 2.0 Act of 2022.

“The six make up 63% of the market share by participant count—a fairly significant entry into the market,” says Neal Ringquist, executive vice president and chief revenue officer at Retirement Clearinghouse, the organization that manages PSN. “But all recordkeepers are welcome and encouraged to enroll.”

In September, Fidelity’s Katie Hutchinson, vice president of defined contribution product platforms, emphasized the magnitude of the issue: that participants cash out up to $90 billion from their 401(k)s each year when they switch jobs—something results in taxes, early-withdrawal penalties and the missed opportunity for compounded returns. Communities of color, women, younger workers and lower-income workers are most affected by the phenomenon, Hutchinson stated in a Fidelity video.

Employers can benefit from auto-portability too, Hutchinson said. Joining PSN reduces employers’ time and paperwork, creates automatic rollover processing and drives consistent plan consolidation, resulting in a “win-win” for employers and employees alike.

PSN’s Ringquist says that removing cash-out leakage benefits participants, recordkeepers and plan sponsors. By rolling over their retirement account, employees in new jobs can start at the new company with money already in their retirement plan, meaning the employer’s average account balance increases. The average account balance is a “key metric” used to evaluate the health of plans and is often used as a factor for negotiating plan fees. In addition, removing smaller accounts from the system helps plan sponsors mitigate administrative hassles, such as by reducing the number of participants’ uncashed checks and the number of missing participants.

Dave Gray, Empower’s executive vice president of enterprise solutions, stated in an interview published last month that more than “11,000 of the plans [Empower] work[s] with have signed up” for auto-portability, adding, “as more time goes by, and due diligence is completed, we are seeing more and more large plan sponsors become comfortable enough as fiduciaries to add the auto-portability service to their plans.”

Retirement Clearinghouse’s Ringquist adds that “a lot of recordkeepers are still working through their development priority queues around mandatory SECURE 2.0 [Act of 2022] provisions, and that’s taken up a lot of development time and resources.  I think as they migrate off the mandatory provisions and into the optional provisions, like auto-portability, we’ll start to see others join [PSN].”

Ahead of adopting auto-portability, plan sponsors’ approval processes may include committee meetings and information security assessments.

“It’s a process, and we’re working through that process with many plan sponsors today,” Ringquist says.

On September 30, Capitalize Money Inc., a technology company that helps people find missing retirement assets, announced that the number of abandoned 401(k) accounts in the U.S. has almost doubled over the past decade to an estimated 31.9 million accounts, as of July.

The accounts now hold $2.13 trillion in assets, an increase of nearly 30% since mid-2023, according to a September update to the firm’s 2023 white paper, “The True Cost of Forgotten 401(k) Accounts,” written in partnership with the Center for Retirement Research.

In December 2024, the U.S. Department of Labor’s Employee Benefits Security Administration launched the public Retirement Savings Lost and Found Database, a tool designed to help America’s workers and beneficiaries search for retirement plans that may still owe them benefits. Also created as part of SECURE 2.0, the database serves as a centralized location where individuals or their beneficiaries can search for lost or forgotten accounts and receive guidance on how to claim their funds.