Explaining fiduciary obligations for 401(k) consolidation

USA Today made a splash in early June 2025 with an article about the approximately $1.7 trillion languishing in lost or forgotten 401(k)s. The average unclaimed balance from these 401(k) accounts is $56,616. 

The findings, taken from a 2023 report compiled by Capitalize, come at a time when there is an industry utility established by the country's six largest retirement plan recordkeepers, the Portability Services Network, ready to help participants, sponsors and recordkeepers facilitate the seamless plan-to-plan portability of smaller lost or forgotten 401(k) accounts, with up to $7,000. 

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Although the Portability Services Network is available for use and other recordkeepers are welcome to join, some plan sponsors and recordkeepers may be concerned about the potential fiduciary liability associated with the rollover and roll-in transactions that transport 401(k) account balances from a participant's former-employer plan into an active account in their current-employer plan. 

The process powering 401(k) account consolidation is auto portability, the automated transfer of a 401(k) account of up to $7,000, which is involuntarily distributed to an IRA and then into an active account in a participant's present-employer plan. Under the process, plan sponsors and their recordkeepers must work with an automated portability provider. The aim is to search for and locate a participant's small (below $7,000) account in a previous employer's plan, match the participant with the participant holding an active account in a current employer's plan and enable the automatic rollover of that balance into the active account. 

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Understandably, as fiduciaries, plan sponsors may be concerned that they could be held liable for the actions of the portability services provider they work with. This is especially true with proposed regulations for automated plan-to-plan portability issued on January 29, 2024 by the U.S. Department of Labor (DOL).   

However, the minds of plan sponsors can be set at ease. That proposal is not enshrined in law and has no sway over the 2018 advisory opinion issued by the DOL, which established the fiduciary framework for automated plan-to-plan portability and took the fiduciary liability for rollover transactions off of plan sponsors and onto portability providers.  

The regulatory framework for plan-to-plan portability transactions was enshrined in the SECURE 2.0 Act of 2022, including fiduciary responsibility. The 2024 proposed regulations came to fruition only because, in the SECURE Act 2.0, it was stated that the DOL would follow up with final regulations for auto portability transactions within a year. After one year (2023) passed, the DOL issued its proposal in January 2024. 

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There wasn't much progress made on the proposal by the DOL in the final months of Joe Biden's presidency. The Trump Administration has other priorities as far as regulations are concerned — so it's unlikely that any "final regulations" will override the regulatory framework for automated portability transactions already in the SECURE Act 2.0. 

Plan sponsors and recordkeepers — like any service providers — are right to wonder about the possibility of liability, fiduciary or otherwise, with the integration of new technology features into their offerings and operations. As far as auto portability for small, stranded accounts in their 401(k) plans, they don't need to worry.

At a time when there is a great deal of retirement savings in need of "rescue" from abandoned and forgotten 401(k) accounts, plan sponsors and recordkeepers can make a big difference in filling our country's retirement-savings gap by adopting the technology that enables the seamless consolidation of 401(k) accounts at the point of job change.