Vanguard has announced that they will introduce an auto-portability service for its 401(k) plan sponsor clients and their participants.
Vanguard will work with Retirement Clearinghouse (RCH), to provide plan sponsors with a portability solution aimed at simplifying small-balance 401(k) rollovers. The service is expected to launch in mid-2022.
RCH automates the movement of an employee’s 401(k) savings account from their former employer’s plan into an active account with their current employer’s plan.
The intent is that the RCH service can also help simplify plan administration and improve plan compliance by reducing the instances of abandoned accounts and uncashed checks.
When a participant with less than $5,000 in a 401(k) plan changes jobs and does not move his or her money, the plan can transfer the account savings into an individual retirement account. The IRAs are then typically invested in either a money market fund or certificate of deposit, which do not offer high returns.