A coalition of major 401(k) administrators has launched an automatic portability system to reduce cash-outs when employees leave jobs with small retirement account balances. The Portability Services Network, operating since November 2023, includes Vanguard, Fidelity Investments, Alight Solutions, and other administrators working with Retirement Clearinghouse.
Research from Vanguard shows the system has significantly reduced cash-out rates. Among workers with balances under $1,000, the share cashing out declined to approximately 9% from roughly 50% after employers joined the network. For accounts between $1,000 and $7,000, cash-outs fell to 31% from 39%. The system automatically transfers small balances into safe harbor IRAs when workers leave participating employers, holding the money until it can be matched with a new employer’s plan.
However, adoption challenges limit the system’s effectiveness. As of early 2026, only 6% of accounts transferred into interim IRAs successfully moved to new employer plans, primarily because few employers have enrolled in the network. Of the roughly 220,000 outbound rollovers analyzed, the median balance was $200, with nearly three-quarters under $1,000. Participants were typically 31 years old, earned approximately $20,000 annually, and had worked for their previous employer about six months.
The system faces additional obstacles, including fee erosion on small balances held in conservative investments and complications with Roth accounts. IRS rules currently prohibit rolling Roth IRAs into new employer 401(k) plans, even Roth 401(k)s. Network leaders are advocating for legislation to enable Roth portability. As of the reporting period, 23,787 plans representing 7.73 million participants had adopted automatic portability, with 1.22 million eligible participants awaiting matches to new employers—an increase of more than 25% since the beginning of 2026. Since launch, the system has completed 53,118 transactions totaling $71.3 million in assets transferred to new employer plans.
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