A bipartisan bill that would allow a worker's 401(k) plan to be automatically rolled over to a new employer when changing jobs has been introduced in the House.
Rep. Brad Schneider, D-Ill., and Rep. Ron Estes, R-Kan., introduced the Advancing Auto-Portability Act of 2022 on Oct. 28. It is a companion bill to legislation with the same name introduced in June by Sens. Tim Scott, R-S.C., and Sherrod Brown, D-Ohio, that's aimed at reducing plan leakage.
Under the bill, employers are eligible for a $500 tax credit for the year in which they adopt an auto-portability program, and employees must be given at least 30 days' notice of an automatic portability transaction. Also, after no more than three days after such a transition, employees must be given a disclosure encompassing "all relevant information regarding the location and amount of any transferred assets," a statement of fees and a telephone number to reach the automatic-portability provider.
An automatic-portability provider must acknowledge in writing that it is a fiduciary on auto-portability transactions; its fees "shall not exceed reasonable compensation and must be approved in writing by the plan fiduciary;" and it "shall not market or sell data relating to the individual retirement plan," the bill states.
Currently, plan sponsors are permitted by law to kick out small accounts with balances under $5,000 when workers leave by offering them an option to either cash out their balances or transfer the funds to an individual retirement account or the worker's new employer's plan.
