By Spencer Williams, March 10, 2026
Weed Burner Site
If you’re a homeowner, you know that the late summer months often bring more than just warmth and sunshine; they usher in a familiar adversary—the relentless dandelions. Battling these pesky weeds is a rite of passage for many, yet simply uprooting their stems offers nothing more than a fleeting solution. The roots remain embedded in the soil, laying the groundwork for future growth, often more aggressive than before. The same principle applies to managing small retirement accounts owned by departed participants. These administrative nuisances may appear minor initially but can escalate into significant concerns for defined contribution plan sponsors, manifesting as elevated expenses and unintended fiduciary liabilities.
The Challenge of Small Accounts
Many plan sponsors have tried to tackle this growing issue; however, their methods often fail to address the underlying problems. For instance, strategies like rolling over small accounts—those under $5,000—into safe harbor IRAs or automatically cashing out accounts with balances below $1,000 may yield short-term cost savings and an increase in average account sizes. Yet, these solutions can unintentionally create new complications. Because vanished or unresponsive participants may ignore notices regarding their rolled-over accounts, these strategies do not resolve the fundamental issue at hand. With increasing penalties for not locating these participants, sponsors may find themselves pushing sand rather than effectively reducing their administrative burdens. While purging small accounts can lead to a decrease in record-keeping costs in theory, it can also lead to a ripple effect, raising other administrative expenses.
The Proliferation of Inactive Accounts
The root of these difficulties lies in the constant emergence of small and inactive accounts combined with the friction present in the U.S. retirement system that complicates the seamless transfer of balances as individuals transition between jobs. Reports from the Employee Benefit Research Institute (EBRI) highlight a concerning trend: following the Pension Protection Act (PPA) of 2006, a significant surge in small, stranded accounts—estimated at 40.5 million leftover by terminated participants—has emerged, up from 38 million in 2006. This uptick persists despite provisions that permit the creation of safe harbor IRAs for account balances under $5,000.
Moreover, the mobility of today’s workforce combined with the lack of a standard system for migrating retirement savings from one employer-sponsored plan to another has contributed to this overwhelming number of small accounts abandoned by participants. EBRI reveals that approximately 22% of the 66.2 million participants in defined contribution plans change jobs yearly, and about 31% of those job-changers, or roughly 4.6 million participants, will cash out their accounts within a year. The impracticality and expense associated with transferring accounts may discourage these individuals from moving their savings, resulting in a situation where about 47% of retirement savings accounts hold less than $15,000, with the average balance being a mere $4,642.
Auto Portability: A Solution to the Problem
In light of these challenges, the concept of auto portability emerges as a game changer. It offers a systematic, standardized solution for automatically transferring a plan participant’s 401(k) savings from their prior employer’s plan to an active account with their new employer. This innovative approach is akin to the most effective weed killer—targeting the roots of small-account issues rather than treating the symptoms.
In collaboration with Dr. Ricki Ingalls from Texas State University, our analysis via the Auto Portability Simulation (APS) indicates that if auto portability achieves widespread adoption, it could lead to a reduction of 40 million job-changers with less than $5,000 in their accounts by 2045. The implications of such a transformation are profound, as it promises to alleviate administrative burdens and potential fiduciary liabilities that have beleaguered plan sponsors for decades. Furthermore, its implementation may help preserve a staggering $1.5 trillion in retirement savings across America, bolstering retirement readiness significantly.
The Path Forward
Encouragingly, sponsors have technological resources at their disposal to facilitate auto portability. The successful completion of the first fully automated end-to-end transfer of retirement savings from a safe harbor IRA into an active participant’s account underscores the feasibility of creating a nationwide system for such transfers. This development not only provides a pathway to manage the long-standing concerns associated with small account leakage but also lessens related administrative burdens and costs.
Auto portability thus serves as a long-term, sustainable solution that mitigates the challenges faced by both plan sponsors and participants by addressing the foundational issues. The release of a practical ‘weed killer’ empowers sponsors to move beyond merely addressing individual dandelions and focus on eradicating the deep-rooted problems plaguing their retirement plans.
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By implementing strategies like auto portability, we can work towards a future with fewer burdens, allowing plan sponsors and participants alike to thrive in a more streamlined, efficient retirement landscape.
Disclaimer Individuals should consult their tax advisers or legal counsel for advice and information concerning their particular situation. This site provides informational material; it does not constitute financial or legal advice.