Millennium Trust Will Add Auto-Portability to IRA Rollover This Year

The new functionality is intended to reduce retirement savings leakage and expand access to savings options. 


Millennium Trust Company LLC announced it will offer automatic portability functionality for its automatic rollover IRA solution, which has about 3 million participants.
 

Auto portability defaults individuals to transfer their retirement savings from a former employer’s retirement plan to an auto-rollover IRA unless they opt out. They can then move savings to their new 401(k) or a similar employer-sponsored retirement plan.  

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According to Millennium Trust, the new feature will be ready for client testing by the end of June 2023. After it will go live Jan. 1, 2024, the start of the new plan year and coincides with the Secure 2.0 provisions that permit auto portability. 

The firm says that data matching is among the aspects it will be client testing for in June. “But overall, we want to ensure clients who choose to add the auto portability feature to their automatic rollover solution are prepared well ahead of the go-live date on Jan. 1, 2024,” said Erik R. Beck, chief commercial officer at Millennium Trust, in an emailed response. 

Reducing Leakage 

The firm’s initiative aims to combat retirement savings leakage by reducing friction for participants when moving savings, expanding access to savings options, and offering more financial education.  

“One thing often left out of the auto portability discussion is that an existing automatic rollover IRA solution is necessary to enable auto portability,” said Beck. “Our new auto portability feature is an expansion of our efforts to eliminate friction in the transfer of funds between accounts within the retirement system. Plan sponsors who choose to offer auto portability will be able to use Millennium Trust’s solution to match their former participants to the individuals’ new employer retirement plans.” 

An industry-wide initiative for auto-portability has been taking off. Earlier this year, both Empower Retirement and TIAA signed on to the Portability Services Network LLC consortium, a group of participating recordkeepers.  

The network is set up to automatically move retirement plan savings of $5,000 or less to a worker’s new provider upon a change of job. 

Millennium Trust says it is leaning into auto-portability as it builds upon existing efforts. “We are investing millions in reducing friction and improving our search-and-engage services, so including an auto portability feature is just a logical extension as we continue to enhance our capabilities,” said Beck.  

“Also, as the country’s largest independent provider of automatic rollovers, we partner with the majority of the largest recordkeepers and thousands of TPAs and plan sponsors, and we want to give them options,” Beck said. “They don’t need to go somewhere else or build out a ton of new technology. We can leverage our scale and technology integrations to quickly and easily bring this feature to any clients who want it.” 

Optional Add-on  

For Millennium Trust, the new functionality is an optional add-on to the Oak Brook, Illinois-based company’s existing auto-rollover solution, which allows low-balance accounts of non-responsive former employees to be rolled over to an IRA. This maintains the tax advantages of the retirement savings system and reduces leakage.  

Plan sponsors have the option to add auto-portability to their existing automatic rollover solution through Millennium Trust or another provider, as the firm offers an open-network approach to this functionality.  

“Millennium Trust wants to make a broad impact on keeping money in the retirement system by partnering with recordkeepers, third-party administrators, plan sponsors and others in our industry,” said Dan Laszlo, Millennium Trust’s CEO, in a statement. “We welcome any current and future retirement industry providers to join us in this mission. No matter the size of the partner, we want to provide a no-cost, fast and easy option to connect so they can offer their clients choice.”  

Social Security Uncertainty Bolsters Use Case for HSAs, Proponents Say

Because of rising health care costs and the predicted insolvency of Social Security, experts tout HSAs as a powerful tool to save up for health care expenses.  


With Social Security’s Old-Age and Survivors Insurance Trust Fund projected to be depleted by 2033, and the cost of health care expenses continuously increasing, proponents of Health Savings Accounts say these “triple-tax
advantaged” accounts are the most powerful way for people to pay for health care expenses in the future. 

The Social Security Administration recently announced that the combined accounts of the OASI and Disability Insurance Trust Fund are on track to fall short a year earlier than originally projected. As a result, Kevin Robertson, chief revenue officer at HSA provider HSA Bank, believes Congress will likely raise the age for when one can start claiming Social Security retirement income payments and that people should not plan to rely solely on Social Security funds to pay for their medical expenses in retirement. 

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“If you think about it, in a person’s retirement, health care expenses are going to be the largest single category of need,” Robertson says. “Beyond rent or mortgages or living expenses, health care for the average American is very expensive. … When you’re older, the likelihood of having health issues accelerates.” 

Inflation is also driving up the cost of health care and prescription drugs, which in turn increases the cost for plan sponsors. According to data collected by Mercer, employers are projecting a 5.4% average increase in health benefit costs per employee in 2023. 

Meanwhile, HSAs reached $112.5 billion in assets at the end of January, up 8% since year-end 2022, indicating that more people with high-deductible health plans are investing in HSAs.  

A primary benefit of HSAs is that they offer a triple tax advantage: contributions go in tax-free, the funds grow tax-free and they can be withdrawn tax-free.  

recent survey from the Employee Benefit Research Institute showed that 24% of workers were enrolled in an HSA-eligible health plan in 2022. However, the same survey found that deductibles are also prominent in non-HSA plans, with employee-only deductibles averaging $1,451 in health maintenance organizations and $1,322 in preferred provider organizations in 2022.  

“In other words, many workers are enrolled in health plans with deductibles high enough to be HSA eligible but are not technically enrolled in an HSA-eligible health plan and thus are unable to contribute to an HSA,” the EBRI report states. “Something is holding these employers back from offering HSA-eligible health plans to give workers the means to pay their out-of-pocket expenses through HSAs.” 

Only participants in so-called high-deductible health plans can put money into an HSA. 

Robertson says about 100 million Americans are currently able to use the benefits of an HSA, and that number is growing every year.  

A recent bill was introduced in Congress aims to expand the use of HSAs to a broader cross section of Americans, Robertson explains. Entitled the Health Savings for Seniors Act, the proposed bill would allow people who are enrolled in any type of Medicare to contribute to HSAs. 

“[The bill] would dramatically open up the ability for seniors to better afford health care expenditures, save for their future and stretch those health  care dollars,” Robertson says. “Even if they use the accounts solely as an expense pass-through, they would earn the tax benefits of being able to stretch those health  care dollars further.” 

According to Medicare Interactive, those who are currently enrolled in Medicare Part A and/or Part B cannot contribute pre-tax dollars to an HSA because, in order to contribute pre-tax dollars, one cannot have any health insurance other than an HDHP. Medicare participants can, however, continue to withdraw money from an HSA after enrolling in Medicare to pay for expenses, such as deductibles, premiums, copayments and coinsurances.  

The Health Savings for Seniors Act was first introduced in April 2022 and is backed by Representative Ami Bera, D-California, and Representative Jason Smith, R-Missouri. The bill did not receive a vote last year, but Robertson says it is expected to be reintroduced to Congress at the end of this month. 

Robertson says, if passed, those enrolled in Medicare could contribute to an HSA from any source of money, whether that be a retirement account, regular income or a Social Security payment. 

Unlike flexible savings accounts, HSAs have no time limit for when one must spend the money on qualified health expenses. The IRS allows participants to roll over their HSA funds every 12 months and still maintain the tax-free status.  

“This is one of the reasons why HSAs are so powerful,” Robertson says. “It affords a lot of flexibility and control in terms of what they’re able to do. It doesn’t matter if one is spending now or spending laterthey still get the benefits on the front end and on the back end.” 

Nicole Asher, a senior wealth management adviser at Greenleaf Trust, in Kalamazoo, Michigan, says in order to prepare for the projected Social Security insolvency, plan sponsors need to encourage participation in their retirement plans. 

“Even if somebody starts with [contributing] a minimal amount out of each paycheck, and that grows each time they get a raise, it really does make a difference,” Asher says. “If Social Security cuts are made, people need to be prepared, and the longer they have to prepare, the better off they’ll be.” 

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