Auto-Portability Key to Retirement Security, Says EBSA’s Gomez

The automatic portability of workplace retirement savings is among the key areas on which regulators are seeking feedback to improve retirement security in the U.S., according to the head of the Employee Benefits Security Administration.

EBSA guidance on the SECURE 2.0 Act of 2022’s Section 120, known as the automatic portability transaction regulation, hit the Federal Register Monday, initiating a 60-day comment period that will end March 29. The proposal provides an exemption for auto-portability providers to transfer forgotten retirement savings into a new workplace-retirement plan, with the goal of limiting lost or difficult-to-locate funds.

Assistant Secretary of Labor Lisa Gomez, the head of EBSA, highlighted the provision as one of several into which EBSA is digging in this year.

“When changing jobs, one of the biggest decisions that you have to make is whether to roll your savings over to a different plan or an IRA,” Gomez says. “It’s an important decision, depending on how much you have saved, and particularly important today, when the greatest part of a person’s savings is often in their retirement account.”

Lisa Gomez

Gomez noted that the provision ties into the recently proposed retirement security rule, often called the fiduciary proposal, because it addresses a pivotal moment in workers’ financial lives when they are between jobs and may be rolling over funds. That proposal, which has received industry and policymaker backlash arguing that enough regulations already exist, seeks to bring one-time rollover advice under the Employee Retirement Income Security Act’s fiduciary standards.

“Whether and how [participants] roll over their money can be the biggest financial decision that someone can make,” Gomez says. Through the retirement security rule, she says, EBSA and the DOL “want to ensure that no matter who a person goes to and no matter how they are looking to invest their money,” that adviser will be acting in the saver’s best interest.

In its newly published guidance, EBSA notes the issuance of earlier guidance on auto-portability transactions, in 2018, in response to a request by the Retirement Clearinghouse for prohibited transaction exemptive relief for its automatic portability framework. RCH, which received that relief, went live in November 2023 with a program in which the country’s largest recordkeepers automatically transfer unclaimed retirement savings into an employee’s new account.

Focus on Disclosures

When it comes to EBSA’s focus areas, Gomez notes that the department is guided by its goals to ensure people have access to “robust health and retirement benefits” and that they understand and can put those benefits to use.

To that end, she emphasized a recent request for information from the department, along with the IRS and Pension Benefit Guaranty Corporation, seeking input on reporting and disclosures for ERISA-governed retirement plans. Gomez says EBSA is seeking commentary from people in the industry who “do this every day,” as well as advocates and participants themselves.

Their commentary will add to the responses, already being reviewed, to a summer 2023 request for information on simplifying and consolidating reporting and plan disclosures. The end goal of all this activity, she says, is a system workers can understand.

“We are focused on making things more understandable and accessible for the participant,” she says. “We are thinking about things like, How do people digest information better? What [has the industry] done to improve disclosures? How do you reach members of certain communities in different ways?”

Gomez also pointed to recent guidance provided by EBSA and the IRS on plan sponsors offering emergency savings via retirement plans. She believes the use of these pension-linked emergency savings accounts, known as PLESAs, which allow penalty-free withdrawals, may help people feel better about contributing to a workplace retirement plan.

“One thing that I hear frequently is that people who have access to workplace retirement accounts may not be participating because people get worried about tying their money up,” she says. The emergency savings account can help people pay for unexpected items like “the transmission going on your car, or a housing bill, or anything that comes up that people will feel more comfortable that they can access funds to pay for.”

Although offering PLESAs is voluntary, Gomez says EBSA is hopeful plan sponsors will see their benefits, and the regulator has tried to address outstanding questions in the recent guidance.

Some benefits providers have already noted that, while they are in favor of emergency savings programs, they prefer to keep them separate from retirement accounts.

Communication Is Key

Gomez says her time in private practice has helped shape her focus on participant communication. She notes that, when working at New York labor law firm Cohen, Weiss and Simon LLP, she became familiar with workers’ concerns and with issues in plan descriptions or communication.

“This whole relationship of offering these benefits is one in which the workers who are in these plans work hard and have money that could be going in their pockets, as far as wages going into these retirement plans,” Gomez says. “The employers and plan sponsors are also spending money going into these retirement plans. If they are offering a plan, but the people don’t understand them, there’s lost opportunity there.”

EBSA offers to assist people with their benefits via a toll-free number and website called Ask EBSA.