Workplace Plan Portability Network Supports 5M Participants

One year after launch, the network to transfer stranded workplace balances between participating recordkeepers is live with about 15,000 plans.

A little more than one year after the Portability Services Network went live with three of the country’s largest recordkeepers, with three more lined up, it has about 15,000 retirement plans in its system, covering 5 million participants, the PSN announced Tuesday.

The PSN is an initiative from Robert L. Johnson’s Retirement Clearinghouse LLC, a firm specializing in retirement plan consolidation in safe harbor individual retirement accounts. Through the PSN, employees with less than $7,000 in either a workplace defined contribution plan or a safe harbor IRA will see those savings automatically transferred to a new employer plan, as long as its recordkeeper is part of the network.

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The network is designed to prevent savers from forgetting about those tax-advantaged savings and to limit them from cashing out. Research from the Retirement Clearinghouse estimates that, over a 40-year period, $1.6 trillion might be preserved in the retirement system if automatic portability was standard across all plan sponsors and recordkeepers.

The participating recordkeepers whose systems are active are Alight, Vanguard and Fidelity Investments, with Empower set to go live in January. TIAA and Principal Financial Group will go live later in 2025, according to the PSN, which is advocating for more plan sponsors to join.

“Auto-portability was conceived as an innovation to benefit minority and women savers, and it is immensely gratifying to witness its coming to fruition,” Johnson, chairman of both the Portability Services Network and Retirement Clearinghouse, said in a statement.

As of December 1, PSN reported that 549 auto-portability transactions have been completed, with a much larger 7,841 transactions underway.

It takes about 30 to 90 days for a terminated participant or a job changer to become eligible for a mandatory distribution, according to a PSN spokesperson. Once the PSN confirms a match for portability, it takes about 60 days for the network’s auto-portability negative-consent process to go through.

There were about 740,000 401(k) plans in the U.S. as of 2022, according to the most recent data from ISS Market Intelligence, which, like PLANSPONSOR, is owned by ISS STOXX.

The PSN acts as a clearinghouse for locating a participant’s active account and transferring any separate tax-advantaged account with less than $7,000 into the participant’s active account. Recordkeepers that own or participate in the PSN do not receive compensation for facilitating auto-portability transactions from participants; they do, of course, have the ability to keep more funds on their collective platforms.

U.S. savers had $11.3 trillion in DC plans, as of June 30, according to the Investment Company Institute.

PBGC to Pay Benefits for St. Joseph Health Services Retirement Plan

The former Rhode Island church plan was underfunded by $88 million and was unable to fund the minimum required pension contributions.

The Pension Benefit Guaranty Corporation announced Tuesday that it will take over the St. Joseph Health Services of Rhode Island Retirement Plan, paying pension benefits to about 2,500 current and future retirees.

The PBGC estimates that the former church plan is 35% funded, with approximately $47 million in assets and about $135 million in benefit liabilities. The plan was underfunded by $88 million, according to the announcement.

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St. Joseph Health Services was a not-for-profit corporation that operated a hospital in Providence, Rhode Island. The PBGC is stepping in to take responsibility for the plan because St. Joseph Health Services has ceased operations and is liquidating. According to the PBGC, the plan has been unable to fund the minimum required pension contributions, and the pension plan is significantly underfunded.

The sponsor of the plan, St. Joseph Health Services of Rhode Island Inc., sold substantially all of its operating assets in 2014 to Prospect CharterCare. In 2017, the plan was placed into state court receivership. The plan was originally established as a Catholic church pension plan and, as such, was not covered by PBGC insurance.

The plan became covered by the PBGC following the sale of hospital, the appointment of a receiver and a determination by the IRS that the plan was tax-qualified as of 2017.

Rhode Island Superior Court Judge Brian Stern appointed Stephen F. Del Sesto as the receiver, with lawyer Max Wistow named special counsel.

Del Sesto had previously filed a lawsuit against Prospect CharterCare on behalf of the plan and its participants in 2018, alleging that at a certain point, the plan lost its church plan status as defined by the Employee Retirement Income Security Act and was required to adhere to ERISA funding rules.

The parties eventually reached a settlement in 2021, and $30 million was paid to Prospect CharterCare. The lawsuit stated that the settling parties recognized that the claims were “disputed and uncertain” and that the settlement was reached amid a desire to avoid the costs and risks associated with uncertain litigation. Neither party admitted any fault or liability in entering into the agreement.

Retirees currently in the plan will continue to receive benefits without interruption, and future retirees can apply for benefits as soon as they are eligible. The PBGC is currently working with the court-appointed receiver to execute a PBGC trusteeship agreement, at which point the PBGC will become responsible for the plan and pay the pension benefits to current and future retirees up to the legal limits.

Until the trusteeship agreement is executed, the PBGC advises plan participants to continue to contact the receiver with any benefits-related questions.

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