Three of the nation's largest record keepers are teaming up with Retirement Clearinghouse LLC to launch an industry-led auto-portability consortium aimed at reducing plan leakage and improving retirement outcomes.
Fidelity Investments, Vanguard Group and Alight Solutions, in coordination with RCH, announced Wednesday the formation of the Portability Services Network. The consortium, which will launch in the first quarter of 2023, is designed to include up to three additional major record keepers as owners, though is open to all record keepers to connect.
J. Spencer Williams, founder, CEO and president of RCH, which has developed a service that helps automatically move participants' savings back into retirement plans at their new employers, referred in an interview to the consortium as an "industry utility" that "doesn't seek to make a profit," but instead "seeks to deliver economies of scale in the form of ever-lower prices to participants."
The record keepers that own or participate in the consortium will not receive any compensation for facilitating auto portability transactions from participants, according to a news release.
The consortium's main objective is to reduce plan leakage, Mr. Williams said. An estimated $92 billion in savings left the U.S. retirement system in 2015 because Americans who switched jobs prematurely cashed out their workplace retirement accounts and paid taxes and penalties on those cash-outs, according to Employee Benefit Research Institute data cited in the news release.