Senator David Perdue Works To Improve 401(k) Portability
“Auto portability will set millions of working Americans on a better path to a secure retirement”
WASHINGTON, D.C. – U.S. Senator David Perdue (R-GA) joined Senator Tim Scott (R-SC) in urging the Department of Labor Secretary Alexander Acosta to clear the path for implementation of 401(k) auto portability, which would make it easier for Americans to save for their future.
On average, approximately 14 million Americans change jobs each year, and about 40% of those individuals opt to “cash out” their 401(k)s instead of transferring those funds to another retirement account. These cash outs incur penalties and taxes, which ultimately lead to a $70 billion annual loss in savings. The highest cash out rate occurs with workers with the smallest account balances, $5,000 or less.
“Retirement plan cash out leakage at the time of a job change is harmful to workers’ retirement,” wrote the senators. “With an estimated 14 million workers with 401(k) plans changing jobs each year, reducing leakage and consolidating low-dollar accounts through greater use of auto portability will set millions of working Americans on a better path to a secure retirement.”
The auto portability option suggested by the senators could result in more than two million employees opting to keep their savings in retirement accounts instead of “cashing out” and incurring losses that carry long term consequences.
U.S. Senators Bill Cassidy (R-LA), Susan Collins (R-ME), Tom Cotton (R-AK), Mike Crapo (R-ID), Steve Daines (R-MT), Pat Roberts (R-KS), Mike Rounds (R-SD), Thom Tillis (R-NC), and Todd Young (R-IN) also joined this effort, which is supported by the U.S. Chamber of Commerce, Financial Services Roundtable, American Benefits Council, American Retirement Association, Investment Company Institute, and the Securities Industry and Financial Markets Association.
View the full text of the letter here.
Senator Perdue is the only Fortune 500 CEO in Congress and is serving his first term in the United States Senate, where he represents Georgia on the Armed Services, Banking, Budget, and Agriculture Committees.
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