At a Glance | September 12, 2019 Gauging the Potential Impact of Auto Portability on Defined Contribution Account Balances at Retirement C A SHOUT LEAKAGE Studies show that the most significant source of defined Percentage Increase in Projected Aggregate Balances at Age 65 With Full and Partial Auto Portability Implemented contribution (DC) plan leakage is cashouts upon termination, especially among workers with SCENARIO 1: PARTIAL AUTO PORTABILITY low plan balances. No effective solution has yet been Income Quartile 55—64 yrs 45—54 yrs 35—44 yrs 25—34 yrs implemented to address this problem. We take a look at two Lowest Quartile + + + + 2% 18% 8% 25% auto portability scenarios modeled by EBRI’s Retirement Second Quartile + + + + Security Projection Model® 2% 7% 15% 21% 1 (RSPM). Third Quartile + + + + 2% 7% 15% 21% Auto portability is where a participant’s account from a Highest Quartile + + + + former employer’s retirement 2% 7% 15% 21% plan would be automatically 0% 40% combined with their active account in a new employer’s plan. SCENARIO 2: FULL AUTO PORTABILITY SCENARIO 1: Income Quartile 55—64 yrs 45—54 yrs 35—44 yrs 25—34 yrs PARTIAL AUTO PORTABILITY Only accounts with less than Lowest Quartile + + + + 4% 26% 12% 36% $5,000 (indexed for inflation) are consolidated in the Second Quartile + + + + new employer’s plan. 4% 11% 20% 29% SCENARIO 2: Third Quartile + + + + 4% FULL AUTO PORTABILITY 10% 19% 27% A participant’s accounts are consolidated in a new Highest Quartile + + + + 3% 10% 18% 26% employer’s plan at job change. 0% 40% Participants arrive at age 65 with one account. In both scenarios, any leakage is limited to hardship withdrawals. SOURCE: Jack VanDerhei. “The Impact of Auto Portability on Preserving Retirement Savings Currently Lost to 401(k) Cashout Leakage,” EBRI Issue Brief, no. 489 (Employee Benefit Research Institute, August 15, 2019). 1. RSPM® simulates retirement income adequacy for U.S. households. The model’s accumulation module reflects the real-world behavior of 27 million 401(k) participants as well as 20 million individuals with individual retirement accounts (IRAs). © 2019 EBRI This report is copyrighted by the Employee Benefit Research Institute (EBRI). You may copy, print, or download this report solely for personal and noncommercial use, provided that all hard copies retain any and all copyright and other applicable notices contained therein, and you may cite or quote small portions of the report provided that you do so verbatim and with proper citation. Any use beyond the scope of the foregoing requires EBRI’s prior express permission. For permissions, please contact EBRI at permissions@ebri.org.