United States Senators Tim Scott (R-S.C.) and Sherrod Brown (D-OH) have introduced the Advancing Auto Portability Act of 2022, which would make it easier for workers to keep their retirement savings with them when they switch jobs. The bill aims to encourage the adoption of auto portability programs.
Currently, when workers with less than $5,000 in retirement savings leave their job, they often cash out their retirement savings, which can lead to significant long term financial losses. According to Boston College’s Center for Retirement Research, if a participant prematurely cashes out their 401(k), they can lose as much as 25% in potential savings for their retirement.
According to the Employee Benefit Research Institute, 31% of the 14.8 million people with 401(k) accounts who change jobs every year will cash out their accounts within one year of the change. However, it is estimated that increased adoption of auto portability would result in an additional $1.5 trillion in retirement savings over 40 years.
The Advancing Auto Portability Act of 2022 would incentivize employers who adopt auto portability with a tax credit of $500 if they offer this option to their employees. Employees should be notified 30 days prior to the transaction and be allowed to opt out.
The legislation also sets some ground rules for automatic portability providers, including:
- Providing written acknowledgment that it is a fiduciary for the owner of the IRA
- Limiting fees so they do not “exceed reasonable compensation”
- Forbidding the marketing or selling of information related to the IRA
- Providing services on the same terms to all plans
• Keeping records for a minimum of six years and conducting annual compliance audits.
For more Employee Benefits information, contact INSURICA today.
Copyright © 2022 Smarts Publishing. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
About the Author
Share This Story
Related Blogs
Putting HR Technology to Work: How INSURICA Clients Gain an Edge with OutSail
Payroll errors that hit the general ledger, open-enrollment portals that freeze at midnight, new hires juggling four log-ins on day one - when HR technology falters, the ripple effects reach every corner of the organization. Yet most employers still rely on a patchwork of legacy systems chosen under deadline pressure.
CPR and AED Training for School Staff: A Life-Saving Back-to-School Priority
As students return to campus, it’s important for school administrators to assess more than just academics and operations. One critical area that deserves attention is CPR and AED training for school staff. Ensuring your employees are prepared to respond to cardiac emergencies can save lives—and now is the perfect time to make it a priority.
Mental Health Parity Requirements are Still in Full Force—Even as New Federal Rules are Temporarily on Hold
In May 2025, the Departments of Labor, Health and Human Services, and the Treasury announced a temporary pause in enforcement of the 2024 final rule under the Mental Health Parity and Addiction Equity Act (MHPAEA), following a legal challenge brought by an employer coalition. This enforcement pause gives the agencies time to reexamine certain provisions and consider future revisions through the regulatory process.