Products September 22, 2021

Vanguard Partners With Retirement Clearinghouse for Auto-Portability Solution

The service is expected to launch for Vanguard's 401(k) plan clients in mid-2022.

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Vanguard says it plans to introduce an auto portability service for 401(k) sponsor clients and their participants.

The firm has engaged Retirement Clearinghouse, LLC (RCH)—a provider of consolidation services for defined contribution (DC) plans and an RLJ Companies’ majority owned company—to provide plan sponsors with a new portability solution to simplify small-balance 401(k) rollovers, help more employees preserve their retirement savings and improve their chances of investment success. The service is expected to launch in mid-2022.

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Research shows 401(k) participants with smaller balances often do not roll over retirement savings into their new plans or tax-advantaged vehicles after changing jobs, Vanguard says in the announcement. When a participant leaves a job with less than $5,000 in their 401(k), employers can transfer those accounts out of the plan and into a safe harbor individual retirement account (IRA), where fees can be higher. This can result in a proliferation of stranded safe harbor IRAs, participant cash-outs and forfeiture of future savings and returns, Vanguard adds.

To reduce the number of participant cash-outs or abandoned savings, the RCH Auto Portability program automates the movement of an employee’s 401(k) savings account from their former employer’s plan into an active account with their current employer’s plan. The service can also help simplify plan administration and improve plan compliance by reducing the instances of abandoned accounts and uncashed checks.

“Our partnership with Vanguard represents a giant leap forward in the campaign to make auto portability for small accounts the new 401(k) plan default process when participants change jobs,” says Spencer Williams, founder, president, and CEO of Retirement Clearinghouse, LLC. “By working with us to expand the nationwide, electronic network connecting employer-sponsored plans, Vanguard is helping simplify the 401(k) rollover process and giving more Americans the opportunity to strengthen their outcomes in retirement.”

Compliance September 22, 2021

PBGC Publishes Q&As About Multiemployer Plan Financial Assistance Applications

The web page addresses how applications submitted before a final rule is published will be affected by any changes PBGC makes.

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The American Rescue Plan Act (ARPA), signed into law earlier this year, allows multiemployer plans that are in critical and declining status to get a lump sum of money to make benefit payments for the next 30 years, or through 2051.

In July, the Pension Benefit Guaranty Corporation (PBGC) issued an interim final rule that lays out the requirements for special financial assistance (SFA) applications and related restrictions and conditions. The agency is accepting applications before a final rule is published.

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In a new SFA Q&A webpage, PBGC says if it issues a final rule that makes any changes affecting the amount of SFA for a plan, the changes will not reduce the amount of assistance payable to any plan that successfully submitted its initial application before the publication of the final rule. In addition, if the final rule includes changes that would result in a greater amount of SFA for plans that have already applied for or received the assistance before publication of the final rule, those plans will be able to receive the greater amount.

For plans that submit an initial application after PBGC publishes the final rule, the provisions of the final rule will be used to determine the amount of assistance those plans will receive, if any.

Since PBGC issued its interim final rule, the main concern among stakeholders has been that permissible investments for the funds will not earn the rate used for calculation of assistance payments, causing the SFA to be depleted before the 30 years it is intended to help plans pay out promised benefits.

However, some entities that have sent comments to PBGC, such as benefits and human resources (HR) consulting firm Segal and the National Coordinating Committee for Multiemployer Plans (NCCMP), expressed concern that the calculations used to determine SFA will result in many plans receiving nothing. Segal estimates 68 plans potentially will not receive any SFA, out of the more than 200 that will be eligible to apply.

With more than 100 comments expressing concern received by PBGC, though, experts are anticipating changes in the final rule.

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