New results from the Retirement Clearinghouse’s Auto Portability Simulation (APS) model further reveal the potential for auto portability to dramatically increase retirement savings. 
Based on new assumptions that increase the model’s predictive accuracy, the firm’s resulting paper—Revisiting the Auto Portability Simulation: The Impact of the Portability Services Network, SECURE 2.0 and Expanded Access—reveals four key findings, including that the net incremental wealth generated by auto portability could be $1.6 trillion over 40 years.
The new assumptions and developments incorporated into the model include:
- The advent of the Portability Services Network (PSN), which has increased the likelihood of industry-wide adoption of auto portability.
- The SECURE 2.0 Act, which not only codified auto portability, but increased the applicable balance threshold from $5,000 to $7,000, effective in 2024.
- The expansion of access to workplace retirement savings plans, via multiple initiatives, including provisions for long-term, part-time (LTPT) workers, pooled employer plans (PEPs), state-level auto-IRA programs, expansion of automatic enrollment and various other initiatives.
A deeper dive into the paper’s four key findings reveals the following.
Key Finding No. 1: Significantly more small-balance job-changers will be subject to new mandatory distribution provisions.
In the new model, over a 40-year period, 342.2 million job-changing participants will be subject to mandatory distribution provisions, regardless of whether auto portability is modeled or not. This represents an increase of 116.2 million participants (34%) over the prior APS model.
RCH notes that 24% of the growth is driven by the increase in the mandatory distribution threshold from $5,000 to $7,000, while 76% is driven by expanded access assumptions.
Key Finding No. 2: Auto portability exerts a dramatic effect on reducing cash-out leakage.
Over 40 years, cash-outs under auto portability average 31% vs. 72% without auto portability, a reduction of over 56%. The paper explains that the 31% figure is a system-wide figure, including cash-outs occurring during the early phases of auto portability’s 8-year adoption cycle, as well as ongoing, high levels of cash-outs incurred by the 20% of plans that do not adopt auto portability. Plans that adopt auto portability should experience a decrease in cash-out leakage to an average of 20% for sub-$7,000 balances, RCH further notes.
Key Finding No. 3: The new APS model projects that auto portability will grow net incremental wealth by $1.6 trillion vs. no auto portability.
The new APS projects that, under auto portability, 175.6 million job-changing participants will consolidate—“roll-in”—appreciated retirement savings of $1.75 trillion vs. $155.2 billion without auto portability. This pegs the net incremental wealth generated by auto portability at $1.6 trillion.
RCH notes that this value is more than prior EBRI analyses that projected the present value of retained savings due to auto portability at $1.5 trillion for accounts less than $5,000, but less than EBRI’s estimate of $2 trillion in benefits for all balances.
Key Finding No. 4: Minorities will derive more benefit from auto portability as expanded access becomes the “great equalizer” in bringing minority DC participation in-line with demographic projections.
The race and ethnicity overlay applied to the APS presumes that—gradually over a 40-year period—expanded DC access will allow participation levels to mirror underlying population demographics, the paper further explains. Consequently, as participation increases for minority demographic segments, these segments will derive “disproportionate benefits” from auto portability, RCH further suggests.
In fact, in the 40-year modelling period under auto portability, 98 million minority job-changers with balances less than $7,000 will preserve an incremental $744 million in retirement wealth, while 30 million Black Americans will preserve an incremental $216 billion in retirement wealth, the findings show.
“The value of any model is dependent upon the accuracy and usefulness of its predictions, and time will tell how the Auto Portability Simulation fares, vs. reality,” wrote Thomas Hawkins, Senior Vice President of Marketing & Research at RCH, in a blog post about the paper. “One thing is certain—the APS model indicates that widespread adoption of auto portability could substantially improve the retirement security of millions of Americans—and recent developments seem to make a stronger case for that outcome.”
The APS was first released in 2016 by RCH and two upgrades were subsequently applied to incorporate new features, as well as enhanced input data, simulation processes and reporting. The last publicly released APS data was in 2019, when the model was updated to reflect a modest expanded access scenario, along with a race and ethnicity overlay to identify the impact of auto portability on minority participants.
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