A New Option for Moving Retirement Savings When Switching Jobs

Until now, some retirement plan administrators were reluctant to offer so-called autoportability for small balances because of regulatory uncertainty. But Secure Act 2.0, the retirement law that Congress passed at the end of last year, formalized the automatic transfers and cleared up some confusion — confirming, for instance, that the network may charge fees for its services. (Retirement savers pay a one-time fee based on the size of the balance. The maximum is $30 and is expected to decline as the network grows, executives said.)

The group doesn’t yet include all the biggest retirement administrators, but the three current owners represented about half the 401(k) market in 2021, according to Cerulli Associates, a consulting and research firm for the financial services industry.

Plus, the portability network said that up to three more administrators — record keepers, in industry lingo — may join as owners, and that any number of administrators may join as participants. The network is in talks with other administrators, said Kevin Barry, president of workplace investing at Fidelity.

“It works best when we have broad participation across the industry,” said Steve Holman, a principal in Vanguard’s Institutional Investor Group.

Here are some questions and answers about moving retirement funds.

In general, when you leave a job and your 401(k) balance is over $5,000, employers let you leave the money where it is. (Starting next year, the threshold will increase to $7,000, as part of the rules changed by the Secure Act 2.0.)

If your balance is below $5,000, your employer can choose to drop you from its plan and, if you don’t provide other instructions, deposit your funds in an individual retirement account in your name. Funds in these “safe harbor” I.R.A.s are low risk but also low earning, and their maintenance fees can erode balances over time.

If your balance is less than $1,000, the employer may simply cash out your balance and mail you a check.