fbpx
Insurica
Pay Now
Client Login

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

INSURICA
INSURICA

Share This Story

Stay Updated

Subscribe to the INSURICA blog and receive the latest news direct to your inbox.

Subscribe to the blog

Related Blogs

Navigating Spring’s Big 3 Severe Weather Hazards: Floods, Hail and Tornadoes

March 1st, 2024|Blog, Education, Trending|

As spring ushers in warmer weather, it also brings the potential for severe weather events that can impact school communities. Understanding and preparing for floods, hailstorms, and tornadoes are crucial responsibilities for school administrators. Let's explore practical tips to safeguard your school community from these hazards.

Target on Safety: Housekeeping and Ladder Safety

February 29th, 2024|Blog, Construction, Trending|

Housekeeping in the workplace? Yes, but it is much more than just sweeping up or taking out the trash at the end of the day. Housekeeping includes a variety of duties that contribute to keeping our workspace clean and safe.

15 Low- and No-cost Employee Benefits to Offer

February 28th, 2024|Blog, Employee Benefits, Trending|

Employee benefits are the cornerstone of a thriving organization. Perks and benefits are pivotal in enhancing job satisfaction,attraction and retention rates, employee well-being and overall workplace morale. While some organizations may feel constrained by budget limitations, there are numerous low- and no-cost benefits that can significantly impact employee happiness and productivity.

Go to Top