The promise and limits of 401(k) auto portability

Vanguard’s early evidence shows that 401(k) auto portability sharply reduces cash-outs of small retirement balances, but its benefits remain limited by low network coverage, fees and conservative interim investments.

• The U.S. retirement system is fragmented: workers report a median of three retirement accounts, and about one-third of sub-$1,000 accounts are cashed out, with three-quarters of those cash-outs occurring within a year of job separation.
• Vanguard completed approximately 220,000 PSN-related outbound rollovers between April 2024 and January 2026; the median transfer was $200, nearly three-quarters were below $1,000, and the typical user was 31 years old with about six months of job tenure and approximately $20,000 of annual income.
• Among 83 PSN-adopting plans, the cumulative cash-out rate within 10 months fell from about 50% before adoption to 9% afterward for balances below $1,000, while the rate for $1,000–$7,000 balances declined more modestly from 39% to 31%.
• The network’s operational benefits include reducing stranded balances, uncashed checks and administrative work for former employers, but only about 6% of Vanguard participants with a PSN rollover had been matched into a new employer plan by early 2026; 94% remained in interim IRAs.
• Unmatched balances can face recurring account fees and conservative default investments: with a 3% annual return and a $2 monthly fee, an account needs about $800 to offset one year of fees, while a possible $30 matching fee raises the illustrative one-year break-even balance to about $1,800.

Takeaway: Auto portability is highly effective for the small accounts most exposed to leakage, but investors and policymakers should not assume system-wide benefits until PSN participation expands beyond roughly 3% of U.S. 401(k) plans and transition fees and default investments are improved.