Retirement plan record keeper Empower announced Monday that it’s joining the Portability Services Network, a group of record keepers, including Alight, Fidelity and Vanguard, working to promote auto-portability of defined-contribution plan assets.
The network uses the Retirement Clearinghouse to build a digital hub that connects record keepers and retirement plan sponsors and allows them to automatically transfer account balances of less than $5,000 in 401(k), 401(a), 403(b), and 457 plans when workers change jobs.
The Employee Benefit Research Institute estimates that about $92 billion in assets leaves retirement plans each year because workers who are changing jobs cash out. Workers who have less than $5,000 in a plan are more likely to cash out than workers with bigger balances, research shows. EBRI estimates that if auto-portability were widely available, $1.5 trillion could be added to U.S. retirement savings over the course of 40 years.
“Empower is a welcome addition to the consortium of recordkeepers that includes Vanguard, Fidelity and Alight, and are working together to enable under-served and under-saved American workers pursue financial security in retirement — and close the gap in retirement savings that plagues our minority communities,” Robert L. Johnson, chairman of the Portability Services Network and the Retirement Clearinghouse, said in a statement.
According to the statement, the consortium currently represents approximately 43.8 million workers enrolled in more than 48,000 company retirement plans and Empower will add about 17 million participants in more than 70,000 plans. The service is expected to go live for plans that Empower administers in the first quarter of 2025.
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