In a letter to Department of Labor (DOL) Secretary R. Alexander Acosta, U.S. Senator Tim Scott (R-South Carolina) and other lawmakers requested that the DOL issue an advisory opinion or other appropriate guidance regarding application of the Employee Retirement Income Security Act (ERISA) to auto-portability of retirement savings.
The letter notes that, “Retirement plan cash leakage at the time of job change is harmful to workers’ retirement.” It cites an Employee Benefit Research Institute (EBRI) analysis which found that a clearinghouse that could automatically roll over a participants retirement plan balance to a new employer every time they changed jobs would result in an additional $2 trillion in retirement savings by age 65.
A demonstration for PLANADVISER provided by Retirement Clearinghouse showed that in just more than 30 years, total cashouts could reach $282 billion, and rollovers to other qualified plans would be only $14.7 billion among 8.4 million participants. Its analysis did not include appreciation, so these amounts would be larger if average returns were included. Using auto-portability, in just more than 30 years, cashouts would be reduced to $144.3 billion, and rollovers would be $133.5 billion among 77.5 million participants.
In the letter, lawmakers ask that Acosta use all the resources at his disposal to ensure the DOL examines the issue of auto-portability and issues guidance as soon as possible.
Robert L. Johnson, chairman of The RLJ Companies and majority owner of Retirement Clearinghouse, which provides an auto-portability solution, said in a statement, “I am calling upon Secretary Acosta to demonstrate President Trump’s commitment to improving the economic status of minority Americans by issuing an Advisory Opinion on auto-portability. Over the coming generation auto-portability will preserve more than $480 billion in savings for low wage working Americans and more than $698 billion in savings for all minority workers.”