The Portability Services Network, launched in late 2023, aims to facilitate the automatic rollover of small 401(k) balances when employees change jobs. Research from Vanguard indicates that the percentage of workers cashing out their accounts under $1,000 dropped from about 50% to 9% after employers began using this system.
For balances between $1,000 and $7,000, the cash-out rate decreased from 39% to 31%. However, as of early 2026, only 6% of accounts transferred to IRAs through this network successfully moved to new employer plans, primarily due to a lack of participation from receiving employers.
The median balance of these outbound rollovers was just $200, with nearly three-quarters involving amounts under $1,000. The financial implications of cashing out can be significant, including potential taxes and penalties, as well as the loss of growth opportunities.
The study also revealed that many workers, particularly younger generations, may have lost track of retirement savings from previous employers. Since the network's inception, $71.3 million has been transferred across 53,118 transactions, but challenges remain, such as management fees on small balances and limitations regarding Roth accounts.
Advocates are pushing for legislative changes to allow Roth IRAs to be included in the automatic portability process