New House Bill Allows Automatic 401(k) Rollovers
The bill enables workers to “manage all their retirement assets in one place,” says ERISA attorney Steve Saxon.
Rep. Brad Schneider, D-Ill., has introduced legislation, the Advancing Auto-Portability Act of 2022, to allow for seamless transfer of retirement accounts from employer to employer.
The bill is intended to reduce early cash-outs of defined contribution plan assets — leakage, in industry parlance.
The bill, H.R. 9252, amends the Internal Revenue Code to provide incentives for the use of automatic portability arrangements under defined contribution plans, and for other purposes.
Steve Saxon, principal at Groom Law Group in Washington, told ThinkAdvisor Wednesday in an email that Schneider’s legislation “enables recordkeepers to link up electronically so that an individual can locate all of their various small retirement account balances and move them seamlessly into their retirement account at their new employer.”
The bill, Saxon added, also “reduces [DC plan] leakage by making it easy for an individual to manage all their retirement assets in one place.”
According to the bill’s text, up to $105 billion of retirement savings “leaves the defined contribution pension plan system annually because employees cash out their savings after a job change.”
Sens. Tim Scott, R-SC and Sherrod Brown, D-Ohio, introduced companion legislation earlier this year, the Advancing Auto-Portability Act of 2022, to allow a worker’s 401(k) to be automatically rolled over from a previous employer to a new employer.
The bills may be included in the Secure Act 2.0 retirement legislation that’s expected to pass during the lame-duck session of Congress.