Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Fidelity, Vanguard and Others Team Up to Fight 401(k) Cash-Outs

Your article was successfully shared with the contacts you provided.

This morning, Fidelity Investments, Vanguard and Alight Solutions revealed a new partnership and collaboration with Retirement Clearinghouse LLC aimed at creating a “consortium” of workplace retirement plan recordkeepers, dubbed the Portability Services Network.

The goal of the new network, according to a statement published by the four firms, is to accelerate the nationwide adoption of automatic portability for workplace retirement accounts such as 401(k)s.

The firms hope the portability partnership will help underserved and under-saved workers improve their retirement outcomes.

Through the consortium, workers who change employers can have their workplace retirement savings automatically move to their new retirement plans. According to the firms, 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.

Robert Johnson, founder and chairman of the RLJ Companies and chairman of Retirement Clearinghouse, calls the collaboration a “truly historic moment” for the retirement planning industry. He notes that the need for auto portability has been driven by the lack of seamless plan-to-plan savings portability amid a highly mobile workforce.

According to data from the Employee Benefit Research Institute, 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.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.