Creating a more secure financial future for American workers 

Americans shouldn’t have to jump through hoops and do cumbersome paperwork just to keep their hard-earned retirement savings. When you change jobs your retirement savings should go with you. Period. 

It’s why we teamed up to introduce the Advancing Auto Portability Act of 2022, to save workers both time and money. 

Making it easier for workers to build savings alleviates stress for families and helps ensure every person has the opportunity to retire with dignity, no matter who you are or what kind of work you do. 

Today, if workers have less than $5,000 in their retirement accounts, those savings are shifted out of retirement savings and are often cashed out. When that happens, workers may have to pay taxes and fees on the money they’ve saved.  They also lose the important benefit of compounding retirement growth.

In 2015, the Employee Benefits Research Institute (EBRI) estimated that Americans lost $92.4 billion due to “leakages” from their retirement cash-outs.  This means Americans are losing retirement savings simply because they changed jobs. This represents a serious problem that undermines the ability of 401(k) plans to support Americans in their retirements. 

According to EBRI, more than 5 million Americans with retirement plan account balances of less than $5,000 leave jobs each year. More than half of those workers have their money leak out of the qualified system within a year, and a close look at the data reveals that money is disproportionately lost by Black and Latino workers, and those in the lowest income brackets. 

The Advancing Auto Portability Act of 2022 — which we introduced this summer— would solve this problem by allowing workers to automatically roll over savings from their previous employer to a new employer. Creating continuity will help workers keep more of what they’ve earned for retirement and alleviate some of the stress that already accompanies major life events like changing jobs. 

In the modern economy, Americans are changing jobs more frequently than ever before. The average American will have nearly 10 jobs over their working careers, meaning an estimated 14.8 million workers changing their retirement plans each year. Allowing these workers to seamlessly take their full retirement savings with them to their next job would have a life-changing impact on working Americans and would make a significant impact on the U.S. economy. 

The EBRI found that, when fully implemented, auto portability would preserve nearly $1.5 trillion in additional retirement savings for U.S. workers over a 40-year period. That includes about $619 billion for minority workers.

Ultimately, these efforts are critical to ensure our private retirement system is meeting the demands of 21st century workers and reaching Americans who may not be as engaged with their savings — particularly those from poorer rural and urban areas.

Congress has the opportunity to fold our bill into a larger effort to reform retirement laws. Often referred to as “SECURE 2.0,” the bill passed the House earlier this year by an overwhelming bipartisan majority and is now before the Senate. We have a momentous opportunity to deliver real results for communities that have been left behind for too long. 

We encourage our colleagues to support this bipartisan, commonsense legislation that will create a more secure financial future for American workers, and save people precious time and money. 

Tim Scott is a member of the Finance and Health, Education, Labor and Pensions committees and Sherrod Brown is chairman of the Finance Subcommittee on Social Security, Pensions and Family Policy.